Random thoughts on technical analysis

[CreditViolet]

sorry didnt see this post before,got burried down under other posts
to the age old debate of nature or nurture there i a famous example of turtles, i am sure every one knows it, anyhow pesting the link here http://www.activetradingeducation.com/Trading%20Systems/Turtle%20Experiment.htm
Here is attachment of one research where they try to make automate the trading using nlp... its different issue whether automatic trading successful or not, point is one can train the sw to trade, one can train the human to trade.
Deep blue program by IBM for chess was a classic example where deep blue won first few matches played against garry kasparovb later garry work out the weakness in programming ( end game ) and fight back..humans can programmed well compare to sw ,
Longer ring finger or not, hormones or less of it ( i wonder if guys on steroids like deca durabolin wd be powerful traders as well ) just dont want to jump in to the conclusion, its everybody's opinion, i expressed my views... one thing for sure there is no easy substitute for knowledge of TA,finance and right set of mind frame to succeed in trading and thats going to give the real money ...whatever thing gives the money good for us.
p.s. glad to see your post here after very long time
Alex

Thanks for your detailed reply.

I was more interested in any academic research on the subject but you make good points.Its not that I disagree that traders are 'made' or not but from my experience I have concluded that without some intrinsic ability and developed discipline, success in trading is very unlikely. The turtle program is in itself a good eg of how traders trading the same method had varying results.

So even though one maybe working with the same set of knowledge and tools, the ability to condense and organize the information in an useful way is essentially the difference b/w creating a winning strategy vs a patchwork of aphorisms which disintegrates with any out of sample data.

 

[pkamalesh]

Right, the thing you do to yourself with your lover 'The Hand'



So you gobble up meanings from professional gurus and splurt it out to non-suspecting traders making them believe that lack of technique can be compensated by closing your eyes and forgetting that a trade is on. You probably let other people paint your little picture of what "meditation" and "trading" is - your nimble little cauliflower patch brain casts around for elements that fit in part or the whole of that stereotype. Afterwards you can quickly place those things identified as "stereotypes to blurt around on forums" in your extravagant cabinet of nonsense.

OMG....Jesse sir..just heard about u upto now...but just seeing what u r....i dont even fit in ur scheme of things..heheheh

 

[orderflow13]

May this valentine for a day get rid off the trader within you when you deal with the real love of your life and start experiencing the freedom ..Happy valentine day to all who think love is not a responsibility but a freedom to express & live life to its fullest what you feel.
“ Freedom and love go together. Love is not a reaction. If I love you because you love me, that is mere trade, a thing to be bought in the market; it is not love. To love is not to ask anything in return, not even to feel that you are giving something- and it is only such love that can know freedom. ”

J. Krishnamurti

 

[orderflow13]

system based trading versus non system base trading ( discretionary trading module ) .Both thing has its plus and minuses, for begginers system base trading might save from some losses as money mnagement and exit rules r inbuilt in every system and psychologically its less demanding but in the evolution processs as a trader locking ones views under one line of thinking is not good.
There is a famous example given by J Krishnamurti ( who is against the rules and organization model ) ' There was devil and his friend walking down the street and a man was coming from other side, devil and his friend saw that man bend and picked something in his pocket, devil's friend asked to devil ' what he picked? ' devil said 'Truth' , friend got worried and said thats very bad for you ? devil said dont wory i will help him to organize it ! ..point is truth is a pathless land, and you cannot approach it by any path whatsoever, by any religion, by any society or organization.
In non system base approach however, flexibility can be a double-edged sword, in that especially if the base rules are not clearly defined it gives traders the opportunity, if they are not careful, to gradually deviate further away from their original plan, eventually to the point that the plan becomes meaningless. In other words, greater strength of mind may be required, in order to maintain discipline.
If we mix both things together it will be more fruitful rather than blindly following system and locking the door from the truth ...lets not get the prisoner of own demise .
Alex

 

[orderflow13]

traderji chart by courtesy of alexa.com...same is the chart of moneycontrol.com..
not surprising indeed, price attracts crowd...

 

[Czar]

We need to beat the Jan 2008 highs for the bottom to form

 

[orderflow13]

We need to beat the Jan 2008 highs for the bottom to form

on closer look at tj chart we can see tj daily reach made new intermediate high but market fail 2 do so... its a hidden divergence ROFL

 

[Czar]

on closer look at tj chart we can see tj daily reach made new intermediate high but market fail 2 do so... its a hidden divergence ROFL

I am dead sure we both having this conversation we may be making the all time low point in technical analysis, cheers

 

[orderflow13]

big picture

courtsey - stockcharts.com

also gold globex is higher than s&p 500..last time i mentioned here which happened after so many years, but at that time gold didnt survive the thrust compare to s&p..this time around its convincingly above close to close basis ..which indicate the fear in economy and need to search safe heavens ..globally pain is not over..to our markets to make substantial trend reversal global economic picture must give some boost

 

[orderflow13]

Going through the net found interesting argument about using three indicators to increase probability and how u can achieve 97% results....
formula is something like..
If you use MACD and the ADX together (and the ADX also has a 50% accuracy rate) and they both provide a buy signal, what is the probability that the stock will rise? ( i only took adx and macd ..u can use any indicator )

p = probability
50% is represented here as a fraction
Success means the stock went up
Failure means the stock didn't go up (went down or stayed the same)


Unity is 100%, meaning it comprises all the possibilities of success and failure
Unity = p(Success) + p(Failure)


Rearranging the equation
p(Success) = Unity - p(Failure)


Substituting 1 (as in 100%) for Unity and expanding p(Failure)
p(Success) = 1 – p(Failure(MACD)) x p(Failure(ADX))

Why is p(Failure(MACD)) multiplied by p(Failure(ADX))? If the stock goes down and they both predicted a rise then both had to be wrong, isnt it ?
now...
Substituting values into the formula and solving
p(Success) = 1 – x
p(Success) = 1 –
p(Success) = .75 or 75%

So two indicators, each with a 50% chance of success, when taken together, create a combined indicator (ADX and MACD) with a 75% chance of success. Good, but can we do better?

Now say the third one is the Triply Smoothed Exponential of Log of Closing Price (TRIX).

So, if all three indicates indicate a price rise, what is the probability that they are correct?

Unity = p(Success) + p(Failure)
p(Success) = Unity - p(Failure)
p(Success) = 1 – p(Failure(MACD)) x p(Failure(ADX)) x p(Failure(TRIX))
p(Success) = 1 – (3/10 x 3/10 x 3/10)
p(Success) = 1 – 27/1000
p(Success) = .973 or 97.3%

Then i thought how its possible ? there must be something ....
in above argument they multiply p(Failure(MACD)) x p(Failure(ADX)) x p(Failure(TRIX))..that means all three indicators suggesting sell signal but market moved up then probability of happening of this =non success ( apposite of p( success ) would be 3% ... in other words if all indicators giving buy signal 97% of time market moves up and same about sell signal... now in practical sense how many time it happens ? its almost the case is that one indicator is giving buy signal then other is giving sell signal then equation wd go down something like 75 %...in other words probability again gone down
..and more worse practical case is.. when all three indicators giving buy we buy but half of the move already been over ( since to move all of different indicators at one direction there need to be more time to form )...
whenever you use the indicator or formula, u must verify its usefulness in practical sense.
Alex