Don't Be Fooled By Randomness

[TheDude 10]

TA, however, isn't about patterns and indicators or even charts. TA is about price movement. All the rest of that stuff came later.

 

Thats just your definition. OK I know youre somewhat of the internet guru on analysis, but everywhere else, TA is charting. End of.

 

Go talk to any trader anywhere in the world and ask him what TA is and he/she will more likely say charting than 'price movement'. Perhaps every trader in the world is wrong and you are right, as after all, you are the guru right?

 

Calling any price movement TA is really in my opinion a weak get out. It makes your years of (valued) internet contributions appear rather Freudian in that what ever angle they are questioned, there is a supporting suggestion of evidence. A clever trick, but its been pulled before and people are clued up to it.

[SIUYA 11]

Sure - its change in behaviour. BUT heres the difference - the chart shows the change in behaviour AFTER the fact. The traders in the video, and what any successful trader does is anticipate that change BEFORE or AS it is happening. If you wait for the confirmation, youre buying when theres a 50/50 chance the movers are already selling.

 

These guys are TRADING. They are not ANALYSING which is what people with charts do.

They remember levels, they remember what people are thinking, they understand how the rest of the market is positioned. They take advantage of that knowledge. They play a game. The chartist, sees those games, thinks hes spotted something, acts on it, gets his ass handed back to him, and chalks it down to not all trades are winners.

 

I agree with what you are saying except in the idea of throwing away the charts. They are still a tool - best to realise what they can be properly used for, how to use them and how to read them......all they do is show you the levels (rather than remembering them), show you visually the change in behaviour as its happening, and they can make it easy to allow you to anticipate where things might occur, and when they are occurring....a road map.

(They do not represent anything more than that - no matter how many fancy lines they have on them )

A chart is just a visual way to do exactly what you are suggesting winning traders do.

Just throwing away a tool wont make you a good trader - you still need to do the things that are required that you mention....better to have people understand how to use the tool.

Watch a tick chart - it tells you what is happening now.....(I am sure this can have its dangers for some if they get too perfectionist as well)

 

The analysis should always be done before hand - regardless of the type of trader.

The other things you mentioned - working out what others are thinking, how others are positioned is the context - otherwise you are merely reacting -- regardless of the type of trader (mind you reacting and momentum can work if you cut quickly and run long enough sometimes - but it has its downsides)

The change in behaviour can be seen real time.....dont tell us the traders in the video havent done their analysis - how else do they know the game..

Much as you say you have to learn to anticipate, this is different to what many might see as a need to predict.....and again many will try and predict, and predict and predict - usually with poor results. (pedantic maybe but it can make a big difference)

 

Personally - I like charts - why because I am more of a visual person than a numbers person and so i prefer that tool.....some quants use stats, some others use pure fundamentals - some like a tape reader, their memory or instinct.....but a chart is just a tool and that is what is important to remember.

Throwing away a tool can be just as bad as relying on only one tool thinking its a panacea.

I used to have a better memory than I do now - call it age or interest - but I am happy to use anything that helps.

 

If anything you are correct in the idea that people think the chart can anticipate a move - they cant, as the trader you need to.

[SIUYA 11]

There is proof everywhere that 90% of retail traders lose, and we all know, retail traders love to use charts.

 

If people cant see that relationship, then I cant help them. It doesnt matter if its OPM or your own. Either you can make money or you cant.

 

 

 

Good to now that the ONLY reason - the only relationship - between winners and losers is the use of a chart.......here in lies the flaw in your argument.

 

To destroy your argument you would only need to find one successful trader who exclusively uses charts or some form of technical analysis or price action.....any of the three would do.

 

Telling people to throw away the chart might work - better advice might be to say - learn to use it, dont rely on it and understand there is a lot more to trading than just reading a chart....it does not hold all the answers.

You are right in some respects - too many retail traders rely on a chart and see it as the only thing - thats just lazy.......but that does not mean that they are going to make you unsuccessful.

 

(I am pretty sure this is not what you mean, but maybe it is, and if so ..........)

[DbPhoenix 42]

Thats just your definition. OK I know youre somewhat of the internet guru on analysis, but everywhere else, TA is charting. End of.

 

Go talk to any trader anywhere in the world and ask him what TA is and he/she will more likely say charting than 'price movement'. Perhaps every trader in the world is wrong and you are right, as after all, you are the guru right?

 

Calling any price movement TA is really in my opinion a weak get out. It makes your years of (valued) internet contributions appear rather Freudian in that what ever angle they are questioned, there is a supporting suggestion of evidence. A clever trick, but its been pulled before and people are clued up to it.

 

How you and other "traders" define TA is irrelevant. TA has been about the analysis of price movement for centuries. If you want to ignore that, go ahead. But that doesn't make it real.

[M.A 10]

There is randomness in your post.

 

Listen a coin flip is very often used in randomness discussions.

 

Put it one on edge and spin it on a tabletop.

 

What do you get?

 

A coin spinning on edge duh ..... till it starts to lose momemtum, begins to wobble then comes to a stop laying motionless.

 

There are moments of randomness and moments of predictability. How much of each, who knows.

 

The market is the same.

 

A bit late in replying but .... anyway. I want to clarify things.

Two of my lines r quoted and not in full but half of one line and half of another. I think it is not a suitable way of understanding one's view. Please read completely and quote a compelete sentence plus context in which it is written.

 

I would like to explain my point in another way which may be understandable for u.

1- Market moves r based on some factors. There r many debates about having "edge" on others in getting information about market. So if u have some "BIG edge" which gives u every information about those factors then there is no randomness for u.

 

2- Practically it is not possible to be in a position where u can get all this information. We assume that u get 70% of the information and remaining 30% of information is unknown. Then based on 70% of the information u will try to predict the future moves of market. Remaining 30% is creating an element of randomness. In other words we can call this 30% as probability of failure or partial randomness.

[FFTrader 10]

Well said duncanhoo.

 

The thing with flipping a coin experiment is that the experiment mentioned could be flaw. It is the PRESUMPTION that a random event with some math (addition and subtraction) will NOT produce a pattern. This presumption is mathematically not sound. The reason being that the "addition and subtraction" of half a point is a rule. That is, you need a mathematically random number generator and ONLY the generator's output is use with no other mathematical manipulation to the output - to ensure randomness.

 

The problem is that with this author (a journalist / economist / writer as depicted by duncanhoo), there is a good chance that during the writing of a book, the research on the concept of randomness and the mathematics behind randomness is probably not well defined / researched. I have not read the book myself but base on what I know with mathematics and base on that certain trading concepts that can work across different markets, I would probably not buy the book.

 

 

 

what makes an economist's book any more correct than the various other books out there on trading?

 

He may have been fooled by randomness and settled on index funds but i am not. Is it a coincidence that he both peddles index funds and is an index fund manager? I can assure you there is nothing "random" in that correlation.

 

I successfully day trade and swing trade using charts alone and no tape.

 

That said, finding a consistently profitable edge in the charts was not easy and took a long time.

 

The first and most important step on my road to success was to stop listening to gurus, talking heads, economists and most importantly - journalists.

[SunTrader 10]

.....

 

There is proof everywhere that winners do not use charts .....

 

Some winners don't. Some do.

 

BTW there is no herd. There are a million and one opinions .... in the internet age ..... on just about any subject. Pro and con. Long or short.

[SunTrader 10]

A bit late in replying but .... anyway. I want to clarify things.

,,,,

 

At best EVERY trade is a guess. Many times an educated guess with very good probablilities of success or maybe even high probabilities. Regardless it is still a guess.

[ratrader 10]

I'm not going to say I read all 8 pages worth of post but I am going to add a few comments people can make of them what they will...

1. Someone made a comment about charts not being useful for Day Traders... I think that is a question regarding trading style, I use charts and patterns in day trading every day... That said some people trade off time and sales and others; whatever works for them. Point: I believe the charts and patterns play a role in all trading.

2. Random(ness?)... I believe, and therefor trade, that in many respects the markets are self-fulling: example - we expect a retest of the high or low and therefor the price gets pushed in that direction. I express marketplace randomness as being a result of 'uncontrollable' elements/circumstances that were unaccounted for. Example: the financial crisis.

3. That 1 study flipping coins produced a chart like pattern say nothing to me because I do not know if it is real or a good tale, a valid study or just a case of random coincidence.

[DbPhoenix 42]

There is also the problem of the misuse of the term "random". The outcome of any given trade is unknowable. That doesn't make it random.

[TheDude 10]

How you and other "traders" define TA is irrelevant. TA has been about the analysis of price movement for centuries. If you want to ignore that, go ahead. But that doesn't make it real.

 

 

There you go again - more 'freudianisms'. Trying to flip definitions around to suit your own cause.

 

TA may be about the analysis of price movement - no one would dispute that. But its the analysis by using a chart. Another way would be to look at MP. Steidlmayer says he developed MP as TA had several shortfalls. I know you would say MP is TA, but if the author of MP says its something else, then Im going to back him. Afterall, Steidlmayers breakthroughs are on another parallel to a 'guru' rehashing someone elses work right!

 

T&S would be another way to 'study' price movement. Again, you'd call T&S TA.

 

You need to call everything TA. Everything is not TA - to everyone but yourself. And on this one I'm going with the herd for a change.

 

I'm not disputing the value of your insights however. Just stating everything is not TA.

 

One thing that has always tickled me however is that you seem to base your internet career on Wyckoff. I've read 2 of his books: How I Trade & Invest.... and Studies in TApe Reading by Rollo Tape or similar. Although somewhere he does mention his own charting method that seems similar to P&F charting, in both books he seems to ridicule those who use TA! I know youve read probably everything he ever published. Did he change his mind?

[DbPhoenix 42]

Don't know what Freud has to do with any of this. In any case, no, not everything is TA. There's also FA, as I've said before in response to you. TA is the study of price movement. Always has been. If you don't understand the difference between TA and FA, that is a cross you'll just have to bear.

 

As for Wyckoff, he didn't ridicule those who use TA; he ridiculed those who follow "geometric shapes".

 

And if you want to admire Steidlmayer, great. Of course, that would involve following charts.

[TheDude 10]

Don't know what Freud has to do with any of this. In any case, no, not everything is TA. There's also FA, as I've said before in response to you. TA is the study of price movement. Always has been. If you don't understand the difference between TA and FA, that is a cross you'll just have to bear.

 

As for Wyckoff, he didn't ridicule those who use TA; he ridiculed those who follow "geometric shapes".

 

And if you want to admire Steidlmayer, great. Of course, that would involve following charts.

 

Freud would argue that his analysis (model of conscious and subconscious) was correct. If a patient or other neurologist disagreed with his analysis, he would say that their disagreement was in fact supportive of his analysis as it was their subconscious rebelling against their conscious thoughts - as explained in his model.

 

In other words, if someone had another idea that was different to Freuds, he would simply cast it off as actually supporting of his model. He refused to acknowledge any other point of view other than his own.

 

This is identical to your stance of including pretty much everything other than FA as TA. You have even stated previously that quantative and statistical analysis is TA. Poppycock!

 

It would seem that you are the one with a cross to bear as you are unable to bear any criticism of TA. Your response seems to be to include the whole remit of different types of analysis as TA - with the exception of FA.

 

As for Steidlmayer - if he says his 'chart' is not TA, who are you to disagree with him? Don't you think it a little arrogant to suggest you know better than the author? I bet you wouldn't show the same contempt to your beloved Wyckoff!!

 

Ok, ok, I know you will say MP is the study of price movement, so therefore is TA, but as is clear to the whole world other than you, you have got your definitions back to front.

 

I'll spell it out for you:

 

1. There is price movement.

2. There are different ways to study price movement.

3. ONE of these methods is TA

4. There are OTHER ways however.

5. Some people think TA is not the best way to analyse price movement

6. Some people think TA is the best way to analyse price movement

7 ONE person believes TA is the ONLY way to study price movement and that ALL other methods are TA. This person probably failed logical reasoning and English comprehension at school :rofl:

 

Capice?

[Guest Muir]

Original topic:

 

If anyone wants to see what a truly random market would look like then I suggest "The (Mis)behaviour of Markets" by Mandelbrot (Father of fractals)

 

Some very nice pics of simulated fractal markets and of what a truly random markets would look like. And a nice primer on fractals to boot.

 

Very entertaining thread.

 

p.s. Nassim is long stocks with way out of the money puts bought, guess he doesn't believe in randomness either but rather inflation. :rofl:

[DbPhoenix 42]

I suppose one might think that debating this is pointless since "The Dude" doesn't understand what technical analysis is and has been for centuries. However, newcomers might read this and get the wrong impression. To them I suggest that they do their own research since debating this is akin to debating whether or not the sky is pink.

 

You admire Steidlmayer so much and yet you think that MP has nothing to do with charts and patterns. If on the other hand it does have to do with charts and patterns, then MP is TA. Unless you define TA as having to do with indicators. If the definition is that narrow, then nobody traded before 1950.

 

FA is the study of the value of a company. TA is the study of the value of a stock (or whatever instrument is traded). That value is determined by imbalances and the ultimate balance, however temporary, between demand and supply as reflected in price movement and illustrated by either a chart of some sort or a T&S display. "The Dude" doesn't understand this, but others do. Perhaps that's enough.

[M.A 10]

At best EVERY trade is a guess. Many times an educated guess with very good probablilities of success or maybe even high probabilities. Regardless it is still a guess.

 

Exactly. It doesnt matter if probability is high or low, if there is an element of randomness, it will be a guess. We can call it guess with high probability of success but it will still be a guess.

But my point is not about if it is guess or not. I am trying to prove that market is bot purely random but partially random. Even if it is partially random, in the end we will call it a guess. Difference between partial and pure randomness is same as in coin flipping and market. Probability is also in coin flipping but it is pure guess or pure randomness. Probability is in market too but it is not pure guess or pure randomness.

[SIUYA 11]

Freud......

As for Steidlmayer - if he says his 'chart' is not TA, who are you to disagree with him?

 

Dude - I had to laugh with the introduction of Freud and this line.....it reminded me of Bill Clinton and his definition - "I did not have sexual relations"

 

"During the grand jury testimony Clinton's responses were carefully worded, and he argued, "It depends on what the meaning of the word 'is' is",[3] in regards to the truthfulness of his statement that "there is not a sexual relationship, an improper sexual relationship or any other kind of improper relationship."[4]

 

.....just a side thought.

There are some quant funds who distance themselves from TA as they dont want to be tarred with the same brush and yet they run historical prices back through all their models and tests, and claim not to rely on subjective or fundamental value driven models....

- its all marketing IMHO.

 

(I am with DBP on this - its either TA or FA - the rest is a matter of degree/usage/BS/chicken entrails ----- all still just another tool - maybe the thread should be called ''Dont be fooled by definitions")

[TheDude 10]

I suppose one might think that debating this is pointless since "The Dude" doesn't understand what technical analysis is and has been for centuries. However, newcomers might read this and get the wrong impression. To them I suggest that they do their own research since debating this is akin to debating whether or not the sky is pink.

 

You admire Steidlmayer so much and yet you think that MP has nothing to do with charts and patterns. If on the other hand it does have to do with charts and patterns, then MP is TA. Unless you define TA as having to do with indicators. If the definition is that narrow, then nobody traded before 1950.

 

FA is the study of the value of a company. TA is the study of the value of a stock (or whatever instrument is traded). That value is determined by imbalances and the ultimate balance, however temporary, between demand and supply as reflected in price movement and illustrated by either a chart of some sort or a T&S display. "The Dude" doesn't understand this, but others do. Perhaps that's enough.

 

More diversion tactics I see. We're talking about your reference, and how you think you know better than an author. I respect Steidlmayer as a trader and a thought leader. I dont worship him or hold him as some demi-god as you do with Wyckoff. I have not devoted countless years of my life reinterpreting his stuff on every trading web site. I'd rather spend my time in the markets, doing, not talking. I use MP a bit here and there, but if truth be told I seldom look at charts. I focus on trading you see, and trading intraday has little to do with demand and supply as you (or was it Wyckoff) like to call it. Odd as that may sound to you I know, but only traders would understand what Im driving at here in this game we play (oops, theres a little clue in that last sentence, can you spot it?)

 

I think its only fair to correct you and point out that its you who doesnt understand what TA is, as you include everything including the kitchen sink! Utter balderdash! This I find astonishing given the years you have dedicated to it. You remind me of a friends 3 year old. He calls every animal a cat at the moment. In his thinking, if it has fur and 4 legs, it's a cat. If it studies price movement it must be TA eh?

 

Anyway, I should point out that this small failing of yours is ok with me. It is only a definition anyway. It doesn't detract from the useful and occasional thought provoking post here and there that you do manage to produce.

 

If you wish to call a horse a dog, or an iron a kettle, thats fine. You may find you will sell a few more of your e-books however if you call a spade a spade!

[DbPhoenix 42]

I focus on trading you see, and trading intraday has little to do with demand and supply

 

Really? 'Nuff said.

[TheDude 10]

There are some quant funds who distance themselves from TA as they dont want to be tarred with the same brush and yet they run historical prices back through all their models and tests, and claim not to rely on subjective or fundamental value driven models....

- its all marketing IMHO.

 

(I am with DBP on this - its either TA or FA - the rest is a matter of degree/usage/BS/chicken entrails ----- all still just another tool - maybe the thread should be called ''Dont be fooled by definitions")

 

AND WHY WOULD THEY NOT WANT TO BE TARRED WITH THE SAME BRUSH MAY I ASK???

 

BECAUSE PROFESSIONAL INVESTORS WOULD RUN A MILE IF THEY THOUGHT THEY WERE INVESTING IN DECISIONS BASED ON TA.

 

WHY? BECAUSE EVERYBODY EXCEPT THE RETAIL CROWD WHO PERPETUALLY LOSE, KNOWS THAT TA DOES NOT WORK.

 

IF IT DID WORK THEY WOULD USE IT

 

IT DOESNT WORK SO THEY DONT.

 

SIMPLE!!!

 

:missy:

[TheDude 10]

So statistical and quantative analysis is TA is it?

 

e.g. Im a stat/quant fund. (and you think thats TA lol)

 

my number crunching suggests i should go long xyz, short abc. I do so. when i close the trade, based on more number crunching, xyz is the same price, so I scratch. abc is also the same price, so that too is scratched.

 

YET i still make money on the trade.

 

How come?

 

Come on Phoenix. You know everything about everything. Tell me how I made money using a branch of TA where there was no price movement?

 

 

This I got to see!....

 

Ringside seats folks......

 

How to polish a turd coming up.......

[TheDude 10]

Really? 'Nuff said.

 

As is your reply!

[DbPhoenix 42]

So statistical and quantative analysis is TA is it?

 

e.g. Im a stat/quant fund. (and you think thats TA lol)

 

my number crunching suggests i should go long xyz, short abc. I do so. when i close the trade, based on more number crunching, xyz is the same price, so I scratch. abc is also the same price, so that too is scratched.

 

YET i still make money on the trade.

 

How come?

 

Come on Phoenix. You know everything about everything. Tell me how I made money using a branch of TA where there was no price movement?

 

 

This I got to see!....

 

Ringside seats folks......

 

How to polish a turd coming up.......

 

How old are you?

 

..............................

[TheDude 10]

So statistical and quantative analysis is TA is it?

 

e.g. Im a stat/quant fund. (and you think thats TA lol)

 

my number crunching suggests i should go long xyz, short abc. I do so. when i close the trade, based on more number crunching, xyz is the same price, so I scratch. abc is also the same price, so that too is scratched.

 

YET i still make money on the trade.

 

How come?

 

Come on Phoenix. You know everything about everything. Tell me how I made money using a branch of TA where there was no price movement?

 

 

This I got to see!....

 

Ringside seats folks......

 

How to polish a turd coming up.......

 

There are 2 answers that I can think of. There maybe more....

 

I'll post the answers at the weekend ON CONDITION DBP has a stab.

 

No back peddling allowed.....

[TheDude 10]

How old are you?

 

..............................

 

Wrong.

 

Try again.

 

:haha: