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> You seem to be suggesting that statistical tools are useless at predicting trends in time-series data. TA doesn't use "statistical tools" in any actually mea

> You seem to be suggesting that statistical tools are useless at predicting trends in time-series data. TA doesn't use "statistical tools" in any actually meaningful or predictive way. It's digital phrenology. Data-driven tea leaf reading. Programmatic palmistry. It deserves only scorn.

unyttigfjelltol 3y ago
Textbook TA uses a lot of voodoo which, itself, is helpful for understanding market psychology. The fact that maybe 20% of market participants give significance to a simple moving average calculated from a certain number of days or weeks-- useful explanatory information! But the core proposition of TA is that a scientific approach to analyzing past price movements will at least hint at the future, sometimes. Not all the time. That's not controversial, and wouldn't be in any other discipline either. Whether it can be profitably exploited at a particular scale or by a particular person-- another question entirely. The interesting thing about applying TA to live markets is ... its adversarial. A pattern becomes known, and that leads it to change. If it doesn't change, we can consider it based in fundamentals. For example, markets are more volatile, on average, in the Fall. Why? Well, it's got to be fundamental because everyone knows this pattern and yet it very often repeats. TA is helpful because we would not identify the fundamental mechanism without first observing the historical cycles of prices.
- codethief 3y ago
  You have phrased your comment very carefully and I agree, sometimes there might be some value in looking at simple trends, if only for the reason that other market participants do the same. > But the core proposition of TA is that a scientific approach to analyzing past price movements will at least hint at the future, sometimes. Not all the time. Will those "hints" be correct more than 50% of the time, though? I mean, if TA did beat coin flips, you could exploit this consistently with a profit. That, however, would be news to me.
  - akdor1154 3y ago
    TFA nearly literally makes that comparison - they show that in their example scenario, they beat coin flips, but lose to buy-and-hold.
- BaseballPhysics 3y ago
  You seem to be confused between descriptive, predictive, and explanatory models. TA is not predictive. It can't help you anticipate the future. If it was, you could make consistent profits by using it, and no one has. If it's right, it's just as often wrong, in which case it's no better than a coin toss or throwing bones or reading tea leaves. It's not explanatory. It provides no hypotheses for why the market behaves in certain ways. If it did it might have some hope of being predictive, but alas, as I already mentioned, it's not. And thus it can't teach us anything about market behaviours or their underlying causes. TA might reasonably be thought of as descriptive, in that it gives a (voodoo) framework for describing observed market behaviours. As you say, we might observe the market is more volatile in the fall. But because it offers no explanatory power, we have no way to know why, and since it has no predictive power, it can't tell us if next year will be the same as this year. You're simply expected to believe that, well, it's always been that way, so I'll assume the future will be the same as the past. As a result, it's frankly not that useful or interesting.

unyttigfjelltol 3y ago

Textbook TA uses a lot of voodoo which, itself, is helpful for understanding market psychology. The fact that maybe 20% of market participants give significance to a simple moving average calculated from a certain number of days or weeks-- useful explanatory information! But the core proposition of TA is that a scientific approach to analyzing past price movements will at least hint at the future, sometimes. Not all the time. That's not controversial, and wouldn't be in any other discipline either. Whether it can be profitably exploited at a particular scale or by a particular person-- another question entirely. The interesting thing about applying TA to live markets is ... its adversarial. A pattern becomes known, and that leads it to change. If it doesn't change, we can consider it based in fundamentals. For example, markets are more volatile, on average, in the Fall. Why? Well, it's got to be fundamental because everyone knows this pattern and yet it very often repeats. TA is helpful because we would not identify the fundamental mechanism without first observing the historical cycles of prices.

codethief 3y ago
You have phrased your comment very carefully and I agree, sometimes there might be some value in looking at simple trends, if only for the reason that other market participants do the same. > But the core proposition of TA is that a scientific approach to analyzing past price movements will at least hint at the future, sometimes. Not all the time. Will those "hints" be correct more than 50% of the time, though? I mean, if TA did beat coin flips, you could exploit this consistently with a profit. That, however, would be news to me.
- akdor1154 3y ago
  TFA nearly literally makes that comparison - they show that in their example scenario, they beat coin flips, but lose to buy-and-hold.
BaseballPhysics 3y ago
You seem to be confused between descriptive, predictive, and explanatory models. TA is not predictive. It can't help you anticipate the future. If it was, you could make consistent profits by using it, and no one has. If it's right, it's just as often wrong, in which case it's no better than a coin toss or throwing bones or reading tea leaves. It's not explanatory. It provides no hypotheses for why the market behaves in certain ways. If it did it might have some hope of being predictive, but alas, as I already mentioned, it's not. And thus it can't teach us anything about market behaviours or their underlying causes. TA might reasonably be thought of as descriptive, in that it gives a (voodoo) framework for describing observed market behaviours. As you say, we might observe the market is more volatile in the fall. But because it offers no explanatory power, we have no way to know why, and since it has no predictive power, it can't tell us if next year will be the same as this year. You're simply expected to believe that, well, it's always been that way, so I'll assume the future will be the same as the past. As a result, it's frankly not that useful or interesting.