Is Technical Analysis a farce
- Thread starter anuragmunjal
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Hi,
I would like to share my perspective on the questions raised. This is my personal perspective though and people may choose to agree or disagree with it based on their viewpoints/experiences.
Is TA farce?
My view is it depends on how you look at Technical Analysis. Many people look at TA as in designing a trading strategy and earning money based on the indicated trades. However a lot of people forget that a successful trading strategy is just 20% of what is needed to become a successful TA trader. Rest 80% comes from descipline and money management.
TA is not a science but a game of probabilities, a game where we try to anticipate the crowd behavior and enter into positions hoping others would do the same later on. But just becuase 10% of the traders are succesful means its a farce? I dont agree, its like only a handful who make it to IIMs every year but that doesnt mean IIMs are farce!
Why to give tips/advice/write books/sell softwares if they are a successful trader
Trading is a business which involves investment & risk, similarly all of the above activities are also businesses which require investment and probably smaller risk. A mature trader would realise sooner or later that the risk involved in the first type of business is much larger than the other businesses.
Why to do both business together, well I dont find it strange to run a speculative business (trading) where returns are not defined along with a business which is non speculative and has defined returns (selling software/giving advice)... If Tata builds cars it doesnt imply that they are bad at producing steel that goes into that car? BOth are separate business run by Tata and now one questions them ...
Then why do you think Ashwini Gujral or others are bad traders becuase they sell their books or appear on TVs ... in any case even as a trader once they buy a stock they would like others to buy it too so that prices go up ... so nothing better than giving that advice to others (any fee is premium !) ... so they are not advicing becuase they are a bad trader .. its a sign of an intelligent trader rather
Running 2 separate businesses should not be used to judge the capability of the businessmen in any of the business .. I dont want anyone to say Mukesh Ambani is losing running RIL thats why he bought Mumbai Indian franchisee
Cheers
Stockhunter (SH)
I would like to share my perspective on the questions raised. This is my personal perspective though and people may choose to agree or disagree with it based on their viewpoints/experiences.
Is TA farce?
My view is it depends on how you look at Technical Analysis. Many people look at TA as in designing a trading strategy and earning money based on the indicated trades. However a lot of people forget that a successful trading strategy is just 20% of what is needed to become a successful TA trader. Rest 80% comes from descipline and money management.
TA is not a science but a game of probabilities, a game where we try to anticipate the crowd behavior and enter into positions hoping others would do the same later on. But just becuase 10% of the traders are succesful means its a farce? I dont agree, its like only a handful who make it to IIMs every year but that doesnt mean IIMs are farce!
Why to give tips/advice/write books/sell softwares if they are a successful trader
Trading is a business which involves investment & risk, similarly all of the above activities are also businesses which require investment and probably smaller risk. A mature trader would realise sooner or later that the risk involved in the first type of business is much larger than the other businesses.
Why to do both business together, well I dont find it strange to run a speculative business (trading) where returns are not defined along with a business which is non speculative and has defined returns (selling software/giving advice)... If Tata builds cars it doesnt imply that they are bad at producing steel that goes into that car? BOth are separate business run by Tata and now one questions them ...
Then why do you think Ashwini Gujral or others are bad traders becuase they sell their books or appear on TVs ... in any case even as a trader once they buy a stock they would like others to buy it too so that prices go up ... so nothing better than giving that advice to others (any fee is premium !) ... so they are not advicing becuase they are a bad trader .. its a sign of an intelligent trader rather
Running 2 separate businesses should not be used to judge the capability of the businessmen in any of the business .. I dont want anyone to say Mukesh Ambani is losing running RIL thats why he bought Mumbai Indian franchisee
Cheers
Stockhunter (SH)
Last edited:
hi..
I must admit that ur understanding and perspective of TA is very good.
but I still have my reservations about the so called technical gurus. if tata builds steel, automobiles, hotels or whatever, he is only accountable to himself or his company. if he does a good job his company will make money otherwise not. on the other hand if somebody is just selling ideas 2 the public,where hard earned money of a common individual is involved, there has 2 be some accountability. my simple question is, a number of analysts are featured on cnbc daily, put one search on google and u would find hordes of people selling trading systems & tips, then why is it that it is rare to find a rich trader, why is it that after listening to hundreds of stories of despair, u find but a few instances of people being successful in trading.
I must admit that ur understanding and perspective of TA is very good.
but I still have my reservations about the so called technical gurus. if tata builds steel, automobiles, hotels or whatever, he is only accountable to himself or his company. if he does a good job his company will make money otherwise not. on the other hand if somebody is just selling ideas 2 the public,where hard earned money of a common individual is involved, there has 2 be some accountability. my simple question is, a number of analysts are featured on cnbc daily, put one search on google and u would find hordes of people selling trading systems & tips, then why is it that it is rare to find a rich trader, why is it that after listening to hundreds of stories of despair, u find but a few instances of people being successful in trading.
In my view, TA is not Trading. Making money in the market need Trading skills, which involves
1) abitlity of understand market direction (TA helps here but there are many who use non-TA based method as well),
2) Risk Management (in trade, over a defined period of time etc)
3) Position sizing - when to go aggressive and increase the position and when to reduce it
4) And on top of all, The mindset of trader - that thinks in probablities, ready to accept the beating when market tell on the face, loud and clear that u are wrong, is emotionally balanced (profit or loss doesn't matter), discpline of following rules/ activities, ability to correct oneself and keep improving..
Now u will see that TA is just a small part of trading. It is people mistake who think that
TA = Trading = Money..
Psychology/mindset is the biggest challange and not all people have traders mindset.
Yes, it can be developed.. but still I think that there is limitation.. whatever I do I can't be Mr World in body building.. That is not my strength.. EAch of us have our strength and weakness.. And let accept the fact, not everybody is meant to be great trader, warrent buffet, soros, paul tudor, john paulson etc.
Trading skills can be learnt and developed.. Many have demonstrated it. I haven't met successful trader who doesn't use TA in his trading.. But not all TA whom I met are good trader..
Why people sell TA service.. because there are lot of buyers for that service. People buy it, because they think other person is GURU of trading and whatever he says, market listens to him.. It is the GAP in peoples perception..
So please don't blame TA for this.
Many successful traders have good business mindset. If one doesn't have business mindset, then it is not possible to make successful trading business. Good trading is boring but that is the fact. These pro traders have their own system that fits their personality, it gives them enough time to other things. And if they decide to sell / teach something which they know well.. then what is the harm.. It is just their business smartness. And if we are not that smart, then either get smart by appropriate action or just focus on what we have to don. You can't stop someone what they want to do.
I wish , people have the maturity to understand what trading is. and use their own judgement about whether to buy the tips/calls from anybody or not.
Happy Trading.
1) abitlity of understand market direction (TA helps here but there are many who use non-TA based method as well),
2) Risk Management (in trade, over a defined period of time etc)
3) Position sizing - when to go aggressive and increase the position and when to reduce it
4) And on top of all, The mindset of trader - that thinks in probablities, ready to accept the beating when market tell on the face, loud and clear that u are wrong, is emotionally balanced (profit or loss doesn't matter), discpline of following rules/ activities, ability to correct oneself and keep improving..
Now u will see that TA is just a small part of trading. It is people mistake who think that
TA = Trading = Money..
Psychology/mindset is the biggest challange and not all people have traders mindset.
Yes, it can be developed.. but still I think that there is limitation.. whatever I do I can't be Mr World in body building.. That is not my strength.. EAch of us have our strength and weakness.. And let accept the fact, not everybody is meant to be great trader, warrent buffet, soros, paul tudor, john paulson etc.
Trading skills can be learnt and developed.. Many have demonstrated it. I haven't met successful trader who doesn't use TA in his trading.. But not all TA whom I met are good trader..
Why people sell TA service.. because there are lot of buyers for that service. People buy it, because they think other person is GURU of trading and whatever he says, market listens to him.. It is the GAP in peoples perception..
So please don't blame TA for this.
Many successful traders have good business mindset. If one doesn't have business mindset, then it is not possible to make successful trading business. Good trading is boring but that is the fact. These pro traders have their own system that fits their personality, it gives them enough time to other things. And if they decide to sell / teach something which they know well.. then what is the harm.. It is just their business smartness. And if we are not that smart, then either get smart by appropriate action or just focus on what we have to don. You can't stop someone what they want to do.
I wish , people have the maturity to understand what trading is. and use their own judgement about whether to buy the tips/calls from anybody or not.
Happy Trading.
:clapping:
A Fantastic and True explanation as always we get from "AW10"..
But, I also have some doubts, that I am still struggling in learning trading.but not getting the expected results..(sometime i think i shud leave this practice of trading)will I ever be perfect in Trading and make smart gains from the market.. As I am intending to do it fulltime..
Or they are People who made differently who make money regularly..
One point touches me is One should have a Business mind to be successfull.
Like they says"Trading is only about making money nothing else ..Prakash Gaba" ..as i m an admirer of this trader..
A Fantastic and True explanation as always we get from "AW10"..
But, I also have some doubts, that I am still struggling in learning trading.but not getting the expected results..(sometime i think i shud leave this practice of trading)will I ever be perfect in Trading and make smart gains from the market.. As I am intending to do it fulltime..
Or they are People who made differently who make money regularly..
One point touches me is One should have a Business mind to be successfull.
Like they says"Trading is only about making money nothing else ..Prakash Gaba" ..as i m an admirer of this trader..
Thanks Sanju for your compliment.
If I have to restart my trading journey, then I will start from 4) --> 3) --> 2) --> 1) as explained above in my post. Knowing oneself is more important then knowing indicators and patterns. Unfortunately, I have gone thru all of them in zig-zag fashion. Only when I came across professional floor trader's mentorship, they all got in place now.
I took good amount of losses before realising that part of my mind always think contrary to current trend. Maybe that's how I am so rather then beating myself to be like all other trend following traders (there are many successful contrarian traders as well) , I have to tame this nature. So decided to develop a contrarian strategy placed some rules which gave me boundry to take decision about when to be contrarian and when not to be, the whole trading became lot easier. So now my contrarian mind does not bother me so much cause it knows that it will have its own time. I will execute contrarian trade when time is right. My Low risk option strategies (another thread here) helps me in going against the market with limit risk when all other factors are well aligned.
So, it is understanding oneself that makes all the difference here. Signals from same system will give different results to different people.
As far as business mindset goes - It is not that great. Just basic concepts of what is cost of trading, what is breakeven profit for a trade (i.e. how many points u need minimum to be profitable in a trade), what is your plan to manage your losses, in what condition u would add more money, or take out the money from acct, where are you should be investing your money (books, software, datafeed, broker, learning, internet connection, computer system etc) and how your trading business can finance those cost etc etc..
These are not some points that only IIM guys understand, it is common sense.. but I am surprised how many people don't think on these lines in structured way..(though most of them know it.. but vaguely).. Writing a business plan for trading buss can make a lot of difference.. That is one of the reason that Banks / Lending institute focus so much on solid business plan from a company before lending them any money.
Unfortunately, we don't take trading so seriously becuse we don't think about it so seriously as a business. And when things are done casually, u know it very well how far such casual things can go.
Don't get disappointed and quit the field before u have given proper try to it.
Probably you just need one or two pieces to come in right slots to complete the jigsaw.
I mentioend that like any other field, trading can be learnt. None of us were born engineer, CA, doctor, software programmer.. We learn all those profession in a structured way. Unfortunately, it is difficult to find someone teaching trading like a profession. Most of the people teach part of it..TA/ ElliotWave/ Metastock and leave u false hope that u can go and face the market now. Reading few books on TA or even trading books can not give that clarity. One has to put in effort to assimilate the knowledge and convert that into Skill. And practice those skill to gain experience.
In my view, Professional is the person who has Knowledge, Skill (tricks about how to use knowledge), and Experience with skills.. Weakness in any of these 3 wheels, will only give a unbalanced vehicle which is not able to move forward.
Feel free to share your experience or the areas that u are struggling with and I am sure other members on TJ will give u some hints.
All the best and Happy Trading.
If I have to restart my trading journey, then I will start from 4) --> 3) --> 2) --> 1) as explained above in my post. Knowing oneself is more important then knowing indicators and patterns. Unfortunately, I have gone thru all of them in zig-zag fashion. Only when I came across professional floor trader's mentorship, they all got in place now.
I took good amount of losses before realising that part of my mind always think contrary to current trend. Maybe that's how I am so rather then beating myself to be like all other trend following traders (there are many successful contrarian traders as well) , I have to tame this nature. So decided to develop a contrarian strategy placed some rules which gave me boundry to take decision about when to be contrarian and when not to be, the whole trading became lot easier. So now my contrarian mind does not bother me so much cause it knows that it will have its own time. I will execute contrarian trade when time is right. My Low risk option strategies (another thread here) helps me in going against the market with limit risk when all other factors are well aligned.
So, it is understanding oneself that makes all the difference here. Signals from same system will give different results to different people.
As far as business mindset goes - It is not that great. Just basic concepts of what is cost of trading, what is breakeven profit for a trade (i.e. how many points u need minimum to be profitable in a trade), what is your plan to manage your losses, in what condition u would add more money, or take out the money from acct, where are you should be investing your money (books, software, datafeed, broker, learning, internet connection, computer system etc) and how your trading business can finance those cost etc etc..
These are not some points that only IIM guys understand, it is common sense.. but I am surprised how many people don't think on these lines in structured way..(though most of them know it.. but vaguely).. Writing a business plan for trading buss can make a lot of difference.. That is one of the reason that Banks / Lending institute focus so much on solid business plan from a company before lending them any money.
Unfortunately, we don't take trading so seriously becuse we don't think about it so seriously as a business. And when things are done casually, u know it very well how far such casual things can go.
Don't get disappointed and quit the field before u have given proper try to it.
Probably you just need one or two pieces to come in right slots to complete the jigsaw.
I mentioend that like any other field, trading can be learnt. None of us were born engineer, CA, doctor, software programmer.. We learn all those profession in a structured way. Unfortunately, it is difficult to find someone teaching trading like a profession. Most of the people teach part of it..TA/ ElliotWave/ Metastock and leave u false hope that u can go and face the market now. Reading few books on TA or even trading books can not give that clarity. One has to put in effort to assimilate the knowledge and convert that into Skill. And practice those skill to gain experience.
In my view, Professional is the person who has Knowledge, Skill (tricks about how to use knowledge), and Experience with skills.. Weakness in any of these 3 wheels, will only give a unbalanced vehicle which is not able to move forward.
Feel free to share your experience or the areas that u are struggling with and I am sure other members on TJ will give u some hints.
All the best and Happy Trading.
I am not using any advance trading strategies, but the simple and basic(Support/Res., Patterns,Fibo theory,candle sticks) which gives me an idea when to pull trigger while trading in Nifty, but I am working so shorting even closing breakdown pattern bounces a bit and I am out taking loss, cause i dont know that Nifty is bouncing or in pull back mode, so cant hit exactly at my point..
Hi Anurag,
a) TA(Technical Analysis Not Technical Analysts) Shouldn't Be Blamed For Not Being Able To Make Money.
b) Charting Software Is A Necessity Of A Technical Analyst But You Get Free Software That Does Most & Perhaps More Than Paid Charting Software....What Does A Charting Software Does Is Just Processes Every Scrip Quickly....Based On The Parameters Fed...One Could Do It With A Ruler & Pencil Too...But Then How Many Scrips Would Have Been Possible To Actually Chart On A Piece Of Paper...
c) People Opting To BUY One Thinking The More They Pay For A Software Therefore It Will Be Good Or They Will Make More Money Is The Mentality Of A Trader & Nobody Else Needs To Be Blamed For Such Choices...Except The Trader Himself
d) None Of Tip Sellers Or Any Kind Of Sellers Are Holding A Gun To Anybody's Head To Buy Whatever They Might Be Selling
Now Coming To The Title Of The Thread...Technical Analysis Is One Of The Most Reliable Source For Entry Or Exit Into A Stock
Proof Of The Pudding Is In The Image Below...Each & Every Trigger Was Based On Technical Analysis...& By The Way None Of The Recommendations Were Ever Up For Sale...Infact They Were Posted Here In The Forum As & When The Scrips Had Triggered BUY.
Am I Professional Technical Analyst...No...I Am Just A Trader Who Does His Own Technical Analysis For Trading...How Long Have I Been In This Market....Since 17th May 2008
Am I An Exception...Answer Is NO...Anybody With Simple Tools Of Analysis & Discipline Can Make More Money Than One Can Ever Imagine...What Is Lacking Is Discipline & Belief That Something One Has Been Following Will Work Most Of The Time....
Happy & Safer Investing
SavantGarde
a) TA(Technical Analysis Not Technical Analysts) Shouldn't Be Blamed For Not Being Able To Make Money.
b) Charting Software Is A Necessity Of A Technical Analyst But You Get Free Software That Does Most & Perhaps More Than Paid Charting Software....What Does A Charting Software Does Is Just Processes Every Scrip Quickly....Based On The Parameters Fed...One Could Do It With A Ruler & Pencil Too...But Then How Many Scrips Would Have Been Possible To Actually Chart On A Piece Of Paper...
c) People Opting To BUY One Thinking The More They Pay For A Software Therefore It Will Be Good Or They Will Make More Money Is The Mentality Of A Trader & Nobody Else Needs To Be Blamed For Such Choices...Except The Trader Himself
d) None Of Tip Sellers Or Any Kind Of Sellers Are Holding A Gun To Anybody's Head To Buy Whatever They Might Be Selling
Now Coming To The Title Of The Thread...Technical Analysis Is One Of The Most Reliable Source For Entry Or Exit Into A Stock
Proof Of The Pudding Is In The Image Below...Each & Every Trigger Was Based On Technical Analysis...& By The Way None Of The Recommendations Were Ever Up For Sale...Infact They Were Posted Here In The Forum As & When The Scrips Had Triggered BUY.
Am I Professional Technical Analyst...No...I Am Just A Trader Who Does His Own Technical Analysis For Trading...How Long Have I Been In This Market....Since 17th May 2008
Am I An Exception...Answer Is NO...Anybody With Simple Tools Of Analysis & Discipline Can Make More Money Than One Can Ever Imagine...What Is Lacking Is Discipline & Belief That Something One Has Been Following Will Work Most Of The Time....
Happy & Safer Investing
SavantGarde
thnx savant for the time & effort u put in. u have a valid point.
but it is a little difficult 2 shake my beliefs. the few good traders that I have seen in a span of 15 yrs,do not know the T of technical analysis, whereas i have come across numerous analysts, who after burning their own fingers, start looking for people who can give them accounts to trade or buy their tips in some manner. as a matter of fact I also chanced upon a book titalled
'If they are so good why aren't you so rich'.
anyways i dont have a closed mind, the day I meet a succesful technical analyst trading for his own account, it'll definitely change my perception.
but it is a little difficult 2 shake my beliefs. the few good traders that I have seen in a span of 15 yrs,do not know the T of technical analysis, whereas i have come across numerous analysts, who after burning their own fingers, start looking for people who can give them accounts to trade or buy their tips in some manner. as a matter of fact I also chanced upon a book titalled
'If they are so good why aren't you so rich'.
anyways i dont have a closed mind, the day I meet a succesful technical analyst trading for his own account, it'll definitely change my perception.
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