The big con

[Rams]

I think technical analysis is a big con(conspiracy).The professionals are waiting for us to execute the trades on the charts that they drew up yesterday.The only difference is that today they have turned the charts upside down!If I had a billion rands and the skills of a professional trader, I would be able to draw tomorrows chart before the marktet opens at 9am!And I will only show it to you the right side up when the market closes at 5pm.

[striker]

Not a believer in T/A either, but labelling it a conspiracy seems a bit over the top. My biggest problem is that it is not definitive, relying on past price trends to predict future movements. Stock prices are determined by buyers and sellers,who I believe in the heat of a stock trading environment dont give a damn about those little squigly lines.

[Rams]

I agree that prices are determined by buyers and sellers BUT that is the problem for me and that is when I think I am being conned. If your technicals tell you to buy, who's selling and why is he selling.Surely some -one wants to make you think its a buy?Remember the SEC and Goldman...

[#4]

no - your biggest problem is that you are only looking at one aspect of the entire picture - your entry point. Of all the aspects of technical analysis, that is probably the least important

[Mar-11]

because there are millions of participants, with different time frams, and styles, all looking at different signals, it my look like a short term short to a trader, but a fundamental investor may see a buy based on value with longer time fram, hence the market is always move in a serries of up and down waves, a struggle between buyers and sellers.

[Waddell]

Well said skaaptjop.

[striker]

Skaaptjop - what could be more important than the price you pay (entry point)for a share ? As a trader what you pay for a share and what you sell it for is all that matters , not what the hypothetical charts suggest. T/A is nothing more than an exercise of probabilities, based on past price movements. Just as fundamental analysis often gets it wrong,so too does T/A, but more so.

[TOPIX]

Rams, your argument is just as true for fundamental analysis - If your fundamentals tells you to buy, who's selling and why is he selling? Whether you do technical trading or fundamental trading, you don't know what the market will do next. You're "guessing" that the market will move in a certain way, more often than not... that's pretty much the end of all technical (and yes, fundamental) analysis...if anyone tells you a different story, consider it a "snake oil" tactic. Simply put, technical analysis takes advantage of the follow-thru that normally (usually) exist after a "chart signal" whilst fundamental analysis takes advantage of the follow-thru that normally (usually) exist after a "fundamental signal". But, as Skaaptjop said, this is only the tip of the iceberg. What u need more than anything else in this business is Risk Management and Trade Management ....specially for exits.

[#9]

nope - TA is about assessing situations which you would repeatedly trade and understanding the risk vs reward. It is about identifying the patterns that you would act on. Some people look for low risk entries, others look for situations with explosive potential. Some systems work on 25% probabilities, others like the odds to be more 50/50. The point is that the entry is just one small component. Risk vs reward is, to me the most important consideration, followed by proper money management and ensuring that drawdowns on your capital remain within acceptable levels. This last point is critical. If your are working on a 50/50 system, and you have 100k capital, and you are making 1000 trades a year, you will probably be wondering why you have no capital left, because you would not have considered the impact of drawdowns on your capital by being wrong with a string of trades (not considering the transaction costs, of course!). I will say this though, there is absolutely no imperical evidence to suggest anything that the classic indicators (RSI, STOCH, MACD) have any statistical significance, I don't pay them any attention, personally.

[#10]

sorry, that was nope to striker, not toppix - who is bang on with his point!

[striker]

I think I'll stick in the Warren Bufett camp.

[geordie1]

ta is a tool that encourages trades and therefore is supported by brokers throughout the world as a means of increasing their income-it's certainly not a science and its accuracy is open to debate-

[SimonPB]

an you can say exactly the same for fundamentals .. in fact if you don't, then you're half way up the garden path already ..

[SimonPB]

striker, what matters is what you sell at .. that manages your protfit or loss .. what you pay does not manage the profit or loss ..

[striker]

True Simon, neither system is perfect,but by using fundamentals you are basing your decision on tangibles ( Facts,figures,bal. sheets, quality of management,track record ,div. history etc. etc.)T/A is based on probabilities, with a myriad of differing interpretations and likely outcomes. Why bother with the mumbo,jumbo when a company's intrinsic value can be determined via their published figures and facts,coupled with deeper research and investigation.

[Mar-11]

the mkt is not decided by( Facts,figures,bal. sheets, quality of management,track record ,div. history etc. etc.), but rather by partipants expectations of ( Facts,figures,bal. sheets, quality of management,track record ,div. history etc. etc.). Fundamentals also project future earnings, etc, these are not facts... Im of the belief that most Trading systems will offer better risk adjusted returns than fundamentals, even if its purely because it focuses more on money/risk mgt, with risk(defining before) and reward ratio playing an NB part in the decision making process. Therefore mathematically making the odds in your favour. The problem with fundamental analysis is that when you enter a trade and the price moves down, based on fundamentals the share would be even more attractive, now waht you ride the share all the way down?? Seems if you get it wrong, you will get it wrong for longer. your system somehow has to incorporates sound risk mgt , and make risk(predefined)/reward ratio a Nb part of decision making process , as fundemantals are not based on price movement, how does one do this??

[striker]

... and the same can be said for any method of stock evaluation.

[Mar-11]

im just asking?how do mathimatically but the odds in your without a predifined risk/reward ratio?? And how do you difine a risk/reward ratio based on value/ not price movement?

[Mar-11]

sorry, should read "put the odds in your favour without"

[Mar-11]

share price not reflective of the results !!! on 27 Aug 10:07 It boggles me how this share works - last year it fell sharply after the announcement of the impending unbundling of the Group. it hit a rebound afterward, then we on the backfoot again. It fell about 3weeks back - Now good results are announced but the share ain't budging !!!!whats with this share.....grrrrrr (i want out - but cant stomach this downfall) apoligies to the formitie how post this, but this another eg. of how fund can cont. to go wrong LONGER, and therefore bigger risk,