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If a meteorite hits earth, aliens are discovered, quantum computing breaks encryption, someone launches a nuclear bomb, etc, any of those will affect the stock
by vasco 3y ago
If a meteorite hits earth, aliens are discovered, quantum computing breaks encryption, someone launches a nuclear bomb, etc, any of those will affect the stock market by a lot. Technical analysis can't predict a meteorite or any of those other things, therefore it cannot work.
It "might work if nothing significant happens" but that is just a weasel way of saying it doesn't work.
Now if you're saying you decided to invest in something and you're trying to get an entrypoint and you spot a moment of large deviation from the mean and you use that to influence your operational buying mechanics like how you space out your buys or time them, that I can definitely see. But online you always see these two very different things mixed together.
- jjoonathan 3y agoIf two people at an auction get into a bidding war, do the bids tell you nothing about their psychology?
- Art9681 3y agoBehavior is different at different scales but I see your point. I typically walk to my car after an event, but if I see a group take off running with urgency I will probably do the same thing. Know what I mean?
- AlexandrB 3y agoIt depend on whether they are also trying to use each other's bids to determine each other's psychology. At that point you may be observing a recursive system (I know that he knows that I know that he knows...) and can't be sure how many layers of reasoning each actor is employing.
- teeray 3y agoYou may think so, until it’s revealed that one of the bidders makes all bidding decisions by roll of a die / flip of a coin (you can invent some scheme for doing so).
- jjoonathan 3y agoA coinflip that causes a bidding war is a loaded coin. There is information in that. More importantly, it's backed by genuine human intent to buy whatever the coin says. There is information in that too. This is very far from the zero information situation that you were trying to set up, lol.
- pessimizer 3y agoYou don't get "genuine human intent" from the results of a coin flip. You don't even get to know it's a coin flip.
- jjoonathan 3y agoAll models are wrong, some models are useful. The goal of technical analysis is to find pools of supply and demand at different price points, much like a clustering algorithm. It is reductive by its very nature but it's still a useful approximation because big interpretable clusters can absolutely drive price action and it's helpful to have a model for that. On a good day, you might get the biggest 2 or 3 clusters correct to within 10% and miss several others totaling 1000000x the size and importance of a hypothetical bozo trading based on a coin flip, and this highly imperfect outcome would still be enormously valuable and worth pursuing. It's like politicians assembling a platform by considering the sizes and interests of voting blocs. This strategy was always going to be a reductive, imperfect, noisy mess but that doesn't make it irrational or useless.
- patmorgan23 3y agoNot necessarily. A truly random coin could land on head 100 times in a row. Such is the nature of randomness
- pessimizer 3y agoNot with the prices alone. You need a context to use the prices for insight. They could literally be using the bids as a channel to communicate with each other because they are colluding, or as a performance for observers.
- hn8305823 3y ago> aliens are discovered There is a UAP disclosure hearing in the US House tomorrow: https://www.theguardian.com/world/2023/jul/21/ufos-congress-alien-house-committee-whistleblower https://www.theguardian.com/world/2023/jul/21/ufos-congress-...
- bgirard 3y agoWatch for a Nancy Polosi trade predicting aliens.
- lesuorac 3y agoWhat do you trade if Aliens are real? Are you shorting Tech on the idea that w/e we have now is inferior to theirs? Do you go long on War on the idea that we'll start fighting them? -- Perhaps more difficult, what do you trade if Aliens aren't real?
- time0ut 3y agoIf they are real? Ya, long on Raytheon et al and pray we win the Seven Hour War… If they aren’t, I dunno? Business as usual cause its already priced in.
- somenameforme 3y agoI'm all in on Durex.
- paxys 3y agoDepends on how "real". A microbe discovered on some rock 60 trillion miles away isn't really going to move the markets. An alien attack fleet entering our solar system...maybe go long Raytheon.
- TinyRick 3y agoI've always found it amusing that people think humans would be any match for an NHI species that has technology capable of reaching our solar system.
- paxys 3y agoIt's a lot more simple than that. You don't need to discover aliens to move the market in unexpected ways. A crop failure halfway across the world, a border skirmish between two countries, discovery of a new oil reserve, a ship blocking a canal, a tech company not selling as many phones as anticipated in a quarter...all have ripple effects through the economy and can screw all market projections. Stuff like this isn't a "black swan"...it happens every month. If you want to use math and statistics to get an edge in the market then become a quant trader. People who aren't smart enough for that but want to feel smart get into "technical analysis".
- PartiallyTyped 3y agoCicada populations in two different countries emerge the same year, decimating sesame crops while Indonesian crops remain unscathed and the futures shoot through the roof. Yet, similarly to brownian motion, the thousands of events that cooccur more or less cancel each other out in the grand scheme of things.
- overtomanu 3y agoFrom : Peter Gregory "Cicadas" - silicon valley https://www.youtube.com/watch?v=kxh2X6NjuhY https://www.youtube.com/watch?v=kxh2X6NjuhY
- carabiner 3y agoDoes non-technical analysis work for those events? Nope. TA can incorporate all currently known information about the likelihood of those events though. As they say on WSB, it's priced in.
- vasco 3y agoHow does drawing a teacup on top of a chart incorporate "all currently known information" about anything whatsoever?
- JimtheCoder 3y agoBecause you are not drawing a teacup, you are looking at price patterns. IF you believe in efficient markets, price should be an indicator of "all currently known information"
- ivalm 3y agoIf you believe in efficient market and things being priced in then there is no past price information that can affect future price as future price is entirely martingale. You can’t both believe in technical analysis and in market efficiency.
- 99_00 3y agoThe collective knowledge and opinion is dynamically reflected in the price and volume chart.
- carabiner 3y agoBurgers' equation models traffic flow. Traffic comes from humans and humans behave in patterns. What difference does it make if it's a PDE or a teacup?
- mywittyname 3y agoYou can predict situations like crop failure - if you're an expert in agriculture and have access to data that impacts crop yields. Some things, like weather and major political issues are easily obtained bits of information and are high-impact events. Data like satellite imaging of fields are available at a price and will tell an awful lot about what best-case production figures will be like. Lastly, insider information is around too - asking companies what they planted, sales data on seeds/fertilizer, etc. If a disease is hitting one company, it's probably hitting a lot of them, especially true with live stock. People do pay for this information, and they use it to trade futures. Which is how it eventually gets "priced in." Forecasting is a huge factor in a successful agriculture business. Which is part of why a lot of niche industries tend towards vertical integration - it's much easier to forecast demand when you produce a lot of derivative products. Buy your own stuff; if you planted a surplus then create new products / markets, if there's a shortage, cut production on lower profit items.
- gruez 3y ago>Technical analysis can't predict a meteorite or any of those other things, therefore it cannot work. This feels like you're attacking a strawman version of technical analysis. The claim isn't that you can predict future price movements with perfect accuracy, it's that you can predict it well enough that you can make some money from it. None of our economic models can predict a meteor hitting the earth either. Does that mean we should conclude that all of them "cannot work"?
- stouset 3y agoThe fundamental problem is that everyone else—particularly people with unfathomably deeper pockets and much better access to information to you—can do the same TA as you. To whatever extent it does work, that opportunity is rapidly exhausted. So all that’s left is the unpredictable bits, and those are what you’re at the mercy of. And the unpredictable bits are happening constantly.
- DoodahMan 3y agoSomething to be said about playing in pockets of the market those fat cats stay away from due to lack of the liquidity needed, market cap constraints, etc. There it can be a more level playing field for us minnows.
- mcguire 3y agoOn the other hand, for those same reasons, there is less information available about those markets.
- stouset 3y agoI would be willing to bet significant sums of money that virtually 100% of your trades, in any any of these "pockets of the market", have one of those fat cats as your counterparty.
- username332211 3y agoIn this case profit exhaustion doesn't really work. The assumption of technical analysis is that those with the deeper pockets move the market in certain ways and patterns and it's the job of the short-term speculator to anticipate those ways. But if you assume enough rich people do technical analysis and pattern day trading you can earn money by doing what's essentially technical analysis, but with different patterns - ones designed to capitalize on the old patterns used by the rich. Keep in mind, I'm not saying technical analysis works. I don't think it does, but that's without seriously examining the evidence. I'm just saying that the diminishing profit argument doesn't work. At least not as presented.
- DoodahMan 3y agoI'm not aware of any way to predict a black swan, TA or otherwise. Sometimes shit just happens and no one sees it coming.
- Tenoke 3y agoI think TA is bad because it's priced in but your argument seems like nonsense. It boils down to "the market is probabilistic and you can't know for sure it won't get impacted by things" but if TA gives you even a couple % edge (with black swans averaging out in both directions) it would have been worth it.
- deleted 3y ago[deleted]
- brockwhittaker 3y agoYou're conflating micro and macro price movements. Sure, you can't predict black swan events with technical analysis, but it wouldn't be out of the question to predict short term fluctuations based on a mixture of market psychology and herd thinking. I don't employ any technical analysis in trading, nor am I a strong advocate, but technical analysis is more about reactionary psychology than about predicting the future. In the most micro sense, the market is dictated by single individuals buying and selling stock, and in the broadest sense, it's a statistical result of millions, or billions of unknowns. Those are two totally different games.
- throwaway743 3y agoTo add, it provides a general measure of sentiment. It's a measure of actions taken rather than words. It's not a crystal ball, but does give a slight edge if you figure out which indicators to use. I've used it for years and had very good success when I was actively trading (traded longer timeframes. Usually made weekly/monthly trades) to the point I was able to live off of it. The last couple of years I've taken off from trading to focus on developing my business, but will likely jump back once that launches and is in a good enough place, as it's both a time and emotional drain.
- chewz 3y agoI can assure you that long after aliens or nuclear bomb will do with humanity algorytmic trading will go on using the same price patterns as always.
- BlandDuck 3y agoYou're right, but you don't need all that ... ... when you draw the figures use in technical analysis, the predictions will depend on the relative scales you choose for the x- and y-axis. Case closed.
- sidlls 3y agoWhile I agree that TA is an invalid method for investing, I disagree with your take on it. What you describe are, charitably, outlier events. Statistical models generally aren't useful for predicting singular events, even if they aren't outliers. So you aren't really invalidating the use of TA with that argument.