Bitcoin Forum

Or are there a lot of people still following technical indicators and such.

Of the people who still choose to follow technical analysis, what's popular in bitcoin? What are people using?

Has technical analysis been thoroughly debunked in the bitcoin community yet?

Yes.

Or are there a lot of people still following technical indicators and such.

Yes.

Of the people who still choose to follow technical analysis, what's popular in bitcoin? What are people using?

The usual stuff- MACD, Elliot waves, etc.

So are people actually trading on these things thinking that they have some predictive power over the price of bitcoin? It doesn't really make any sense that these things would have any sort of predictive power over a random indicator based on dice or something.

Thanks for you input! Very enlightening. I will stop using TA now, it clearly is the devil!
TA is stupid all the way when you just can buy and buy and buy and hold and buy and buy and hold!
Who needs TA for that!

I'm not much of  TA user. With most of my investments, in fact, I never even look at it.

In fact, with bitcoin, I don't trade on it at all. However, one could probably make a case that with bitcoin, the analysis of underlying fundamentals is quite a bit more murky than with, say, a stock with earnings.

TA can surely never predict underlying fundamentals, for example, when 5 years of earnings are re-stated due to accounting shenanigans, or a merger offer. But with bitcoin, one could argue that psychology makes up a huge element of the price in the absence of other fundamentals. TA might give some kind of insight into price behaviors that result from psychological factors.

That said, I sure see plenty of TA claims on this forum that turn out to be pretty wildly wrong. YMMV.

Oh! Finally the redeemer came to us.

This board offers as much geniuses as completely non-trolling-retards.

A better question is has TA ever been shown to have any value?

I'm not trying to troll people. But I've seen online communities and people go through infatuations with TA and then slowly come to realise that all of this information that's being analyzed is just descriptive rather than predictive.

I'm just wondering what the status of TA is in the bitcoin community. The supply and demand of bitcoin is of course what determines the price. I'm not here to 'redeem' anyone or convince anyone. I don't mean to come off in an offensive way either, humans are naturally drawn to see patterns in data.

The Bitcoin community is far from any consensus on TA or much else for that matter.

In fact there seems to be a major dichotomy between holders and traders.

Traders often look upon holders as Koolade-drinking Bitcoin cultists, libertarian "true believers" who see it as disruptive technology.

Holders on the other hand often view daytraders as technology-impaired get-rich-quick wannabes who treat bitcoins as if they were shares in corporations, drinking the TA Koolade and failing to see the bigger picture.

This split is a great source of amusement for many of us.

There's always the self profiling prophecy aspect of it. That might have some validity.

Im still following some technical analysis, for day trade i think is still good you can predict some trend when it just jumped . for example price: 650 - 630 - 620 -500 -640 - 630.. it has been like a roller coaster for days.

I can't comment on the validity of your specific idea but I think that's a little different than what I consider standard 'TA'. I would say you're more trying to trade off of market psychology and specific anchor prices.

Some people try to claim that the popular TA indicators are representative of underlying market psychology but without being able to explain the logic behind them, I don't consider them on the same level.

What you're trying to do falls closer to behavioral economics. Since you're basing your idea on predicting people's(the market) reactions to different price points.

The problem is the complete lack of reliable data to test TA in a bitcoin context. It could be done. If you took say 100 TA bitcoin traders over a sufficient period  and compared their results to a notional buy and hold, then there might be a basis for comparison.

But none of the TA traders on the forum seem to be particularly keen on opening their trade books for us Buy and Hold folk to look at  ;)

 

Sorry for my cynicism, but these debates about the value of TA are really exhausting.

I appreciate a good TA, but I refuse to see or accept it as a prediction. For me TA is analyzing possibilities and estamite their likelyhood. Based on this and in awereness that there is almost ever more than one possible scenario I develop buying/selling strategies for myself.

From what I see around, all kinds of TA are use by many people.
If what I read around is true, the most successful are those doing trading with large timeframes (so no daytrading).

This. TA works because there's people out there that actually believe in it. Alternatively, you can buy and hold for 1+ years, not worry about trying to time the market, and enjoy a lower tax rate (long term capital gains) when you decide you're feeling too rich and sell.

Google: park irwin technical

If these things ever did have any predictive power it is essentially a self-fulfilling prophecy that they no longer do. Today, it is merely a means of holding oneself out to have their eyeballs robbed out of their head. In essence, it is like giving the playbook to the other team -- you telegraph when and how you (and a large group of people) will trade. From there, they can backsolve or recreate what the likely movements are and manipulate appropriately. It seems terribly stupid to me.

Just look for high volume candles and draw lines.

Interesting. Can you point me to some resources that show TA has been thoroughly debunked? That, I would like to see. Sounds more like the usual TA bashing you tend to see on this forum. To each his own, I guess. TA has done me well -- well enough that I can now play with pure profit.

Well yeah so in fact i use a mix of technical indicators at the same time i use market pshychology, and i think its the best strategy, i mean with only technical analysis you can barely predict it at long term but at day trading, for example if you are in a market and have seen during last few days this rollercoaster pattern. There i used a tech pattern recognition in the chart ( forming triangles)

But you have to know very well the market and checking the news all the time while the possition is open, if you are not in the middle of a selloff then there is no reason to have a huge drop when the rollercoaster is in the in phase, so you will hit the pattern enough times to make profit no matter if one  or another pattern doesnt complete, you need to check also if this pattern was not behind the recent huge drops.

And then theres here another more complex but common tech-pshychological pattern, it forms triangles again in the chart, the coin is in a bear market, and during last month everytime it crashes to 20 percent or more in one day; it bounces back around the same percentaje or more. You will buy the bottom and sell it high ;) free money, just dont do it in massive selloff bear market you can get burn

I got a link to an apartment complex in Florida called Irwin Park 😄

TA is "self-fullfilling prophrecy" and that's why it works on traditional markets like Forex because everybody is using it. In the other hand, cryptocurrency field is full of geeks and not that much professional traders, so TA is not much used - not having the same effect as it has on Forex.

Tried to use TA for cryptocurrency... Maybe it can be only applied to BTC/USD because it's big, but when you look at alt-coin field, it's so wild TA has no appliance there. Graphs are so weird and you can't see that weird graphs in any of TA tutorials.

A lot of people around here say TA is a "self-fulfilling prophecy" -- I'm not so sure. Fib levels, for instance -- you see those in all sorts of natural and mathematical applications. Large stochastic movements often also bear resemblance to sine functions. I'm not convinced that there isn't more to it.

There are absolutely patterns in bitcoin prices, there is no question about that. (Anyone who doesn't see them are probably blinded by some sort of dogmatic view on TA.) Whether those patterns follow classical TA "rules" or whether they are different for bitcoin, I'm not educated enough in classical TA to say.

However what is absolutely true and what you should never forget, is that studying price patterns can never ever be more than a proxy for understanding market psychology. The price is moved by people, and people cause all the patterns to happen. If a pattern repeats itself, it is only because groups of people tend to act similarly in similar situations.

Its value goes up and down in an entirely predictable fashion :P

Google: park irwin technical analysis profitable, then.

I wish they would just give everyone the same results

For long term view, nothing beat fundamental analysis.

I use TA all the time to trade profitably. Experience is also important, you can't really read a couple books and jump in... you have to understand market psychology which is what TA actually is.

The ultimate choice is:combine fundamental with technical analysis

Their conclusion was that technical analysis gave a small profit on currencies until 1991, but not after, except for Yen.  I didn't see anything about bitcoin and 5-10% profit from trading is way lower than historical profit from buy and hold for bitcoin.

Yes exactly.   TA  isn't a crystal ball its more of a compass

Hi,
I suppose if one begins with the presumption that TA predicts the future then it is understandable that there are detractors.

If you have ever studied TA the first thing you learn is that TA DOES NOT forecast or predict the future. Not one TA/charting specialist would ever say it does!

What you might hear is that:
1. TA first and foremost gives a visual of price action over time and the repetative patterns within.

2. It is a way to marry price, time and volume in derived equations that plot as indicators

3. TA REDUCES the risk to enter a trade or INCREASES profit by knowing when to get out.

I have shown on my imgur site (three installments back) exact entry/exit prices for BITCOIN BTCe. On the charts you can see the entry/exit points I personally followed and traded. Unfortunately not all my calls are on that site because being an active troller on BTCe, I often made my calls there.

So if you visit https://dirkk.imgur.com/ go to BTC album and see the last say 6 installments.

To those that say TA doesn't work on BTC and crypto with liquidity, isn't doing their homework.

Regards and Happy Trading,
Dirk k.

RIIIIIGHT.  So TA is just a way of producing pretty pictures and all you guys are just artists, right?  It has NOTHING whatsoever to do with any attempt to forecast or predict the price.  Come on, your #3 implies forecasts and/or price prediction, as general trends if not exact numbers.

I think you are being a little hard in your words. I agree that a lot of TA posts look like crap and they are. Like watching amateurs playing sport. It's still call NFL or Cricket or whatever but it's low grade. For people that don't understand TA it is easy to be fooled by crap.

In relation to "forecasts and/or price prediction" - well we can all guess can't we? That's a prediction or forecast. I'll state it again TA is designed to REDUCE the risk. If one decides to go with the probability then so be it.

And I wont accept anymore bagging of TA :=)) . BTW visit the site I suggested in my last post if you have the time. That is good TA!

cheers
Dirk K.

There are probably people on here who have successfully used TA to increase their bitcoin holdings.  But they are few and far between and, like most gamblers, will only mention their wins and not their losses.  But the buy-and-holders have done over 90% as well with no sleepless nights or worry or risk of being in all fiat when the next bubble hits. 

And whenever challenged to show how their "system" beats buy-and-hold, they typically disappear or start getting angry.

I completely agree. Well said !

They are just probabilistic models. I'd be surprised if detractors could show any statistical back-testing to prove common TA tools wrong. Try proving fib retracements wrong....

I think the narrative on TA vs buy & hold is a little narrow. It appears the reference is continually on BTC or crypto buy and hold. If your saying that TA is useless in the crypto world then that may be so - but one cannot dismiss TA as a tool for buying stocks, currencies and other securities.

I have shown in my published charts that TA *is* applicable to BTC. I am not a miner. I have no idea of the longevity of crypto - so I trade it and not by gut feeling or responding to 'mooooon'.

If TA is not for you then fine - don't use it. Similarly don't bag and dismiss something just because one doesn't understand it.

>And whenever challenged to show how their "system" beats buy-and-hold, they typically disappear or start getting angry.
that is probably true in some cases

cheers,
Dirk K

Academics that study more thoroughly developed markets don't conclusively agree on the merits of TA
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=603481

Why should we expect anything different from people speculating about the value of a newly developed technology?

I can't understand why smart people who "get" what Bitcoin is have such a problem with TA. It's psychology.

I can take any excited bull market run-up and use TA to estimate how much it will retrace by using fib retracements and/or law of threes. To say there's no merit in it is ridiculous. Will it tell me exactly? No. But I can get a lot closer than guessing.

If you're searching random indicators, reading about them for five minutes on stockcharts.com and thinking you can make money, you're doing it wrong.  

TA isn't psychology or a predictive window into the future. The charts can only relay to you what has already happened. So, in essence, trading using TA alone is like driving a car, and using just the rear view mirror.

That doesn't mean that there aren't some technical wizards making serious bank from recognizing and spotting mere patterns here and there.. But i think that has more to do with luck than any type of skill

Neural networks, such as that in your brain, are also mere pattern recognition machines working exclusively with historical data.  Would you say anything humans achieve by applying their brains is also just luck?  Perhaps there is value in assuming some patterns will repeat.

and psychology of market participants results in chart-Patterns which can be studied and found.then you can say,what direction the market will take based on allways (at least most) the same psychological behaviour
"it is psychology ,stupid"

Not necessarily always luck, but humans often fall prey to confirmation bias. In reality proper application of statistical analysis can tell us much more about a data set than simple pattern seeking.

All of these indicators that people use should be able to be easily proved by back testing them in a large enough sample of data.

Is it theoretically possible that someone could come up with a system based on TA that can show a profit when automatically applied over a statistically significant about of time? Yes.

Is it likely at all that someone drawing lines on charts and attempting to seek patterns is going to accurately predict something that when viewed in a short time frame acts similar to a random walk? No.

My monkey does pretty well for himself (and me).

Yeah, I do okay too. I've always managed to profit in both coin and $$ in the long run. If you can pull a 60% win rate, that's pretty damn good, to be honest. It's all about cutting out your bad trades early and letting the good ones run.

Some of you anti-TAers around here are just using empty rhetoric. I realized I had a knack for trading the same way I had a knack for online poker (too bad liquidity is dead there for US players). Reading probabilities and managing risk. That's it.

I came to cryptos from a background that included reading libertarian and contrarian economic articles. Market Oracle comes to mind. The clincher with Elliiot Double Shoulder Trend Line Uppy Downy Wisdom Corp is that the authors are always incommunicado. Overall, I suggest that they rely on a revolving-door reality of impressed noobies who nibble nibble; win a little or lose a lot; and drift off.

And . . . I don't think their rules would apply anyway to Bitcoin.

Mark Blair, Unicup, Western Australia

People here saying "TA is total bullshit" are just noobs that tried to daytrade but lost money because they had no idea of what they were doing.
It's okay though. Basic TA is nothing particularly hard to understand and apply in order to increase your holdings, but some people are just too lazy to learn something new and try to apply it.

They prefer to "HODL", and they think daytrading is just gambling, so that you know, it's not really their fault if they lost money...

HODLING is fine if you don't have time for daytrading and if you want to be a more relaxed investor in BTC, but please don't go around screaming general statement like "TA is bullshit" or "daytrading is gambling! the price just does whatever it wants", that just makes you look like a noob.

Feeling that you have an intuitive understanding of trading and the market doesn't mean that TA works. Also having a 60% win rate doesn't tell us anything about the EV of a set of trades.

To use a poker analogy, I feel most people who follow TA are the same people who call a naked gutshot on the turn with no showdown value against a bet that doesn't give them odds because they 'feel' it. Except in this case they draw lines and use fancy sounding indicators that they think predict something that is incredibly complex underneath it all.

I think there is lots of potential for people to apply a quantitative approach to any market, but this type of thing is so far beyond your average internet TA guy that it might as well not be considered. Most people doing that sort of thing would never think of sharing their work. Or they work for a company that contractually forbids them from doing so.

I think I can sum up my feelings on TA this way: If you're not a quant, anyone who only looks at the 'what' of the market, without asking 'why' is essentially gambling. You can have 50 fancy lines and curves on your graph but without understanding the underlying movements they are meaningless and only tell you what has happened. They are not predictive. And if they are, they can be statistically proven to have a correlation with the price and anyone not doing the math to show that is just trying to find water with metal rods.

You have a wrong idea about what basic TA done right actually allows the trader to do.
TA doesn't just tell "Do THAT" at whatever point in the graph. TA doesn't just allows to draw exactly what the price will do in the future. TA allows you to predict scenarios and react accordingly.

Simple example for anybody to get:   You see a huge triangle pattern forming, soon the price will have to breakout of that triangle.
TA doesn't necessarily tell you if we are going to go up or down after (depends, sometimes it almost does), but if we break out of the pattern and we start to go up it's a strong buy signal, if we start to go down it's definitely time to sell. Of course look at an increase in volume at the moment of the breakout in order to confirm it.
That's it.

If you think TA is supposed to tell you "BTC's price will be at $5032.04 on 12th of March 2015", you have a wrong idea about what TA is supposed to be.

Again, your idea of the way TA is supposed to predict markets is wrong IMHO.

If your question about TA was "Using TA, can we have a pretty good approximation of what the price of BTC will do in 2015?", the anwer is clearly no, but that is obvious, and it doesn't seem to be what you are talking about.

If your question instead is: "Using TA (done right), can we predict and/or react to certain price movements in order to profit?" the anwer is yes.

No, I don't think that at all.

Even if you use your TA to give a price range and corresponding probabilities I still think it's no better than random unless you can statistically prove that its not.

I significantly increased my BTC holdings using basic TA applied to BTC trading, a lot of other people here too.
Are you just telling me that you think that overall there are no traders that are having better performances than others? that basically if you stick to trading long enough every trader's probability of making a profit tends to 0? just like playing the slot machines at a random casino?

Because that's what your statements imply.

I get where you're coming from. "If it works, it should be possible to _show_ that it works." (where "show" means something like "up to current academic publication standards"). Did I get that right?

Let me make a countering case. I suggested the analogy before in some other thread, so apologies for the repetition:

Imgagine you're a computer scientist in the 1970s. You implemented a computer chess algorithm on the fastest then-available machine, nothing more complicated than alpha-beta pruning (or variations of it). You still fail to beat a competent human GM. Consistently.

So, you ask the GM how he plays chess. He'll throw an entire library of opening theory (or endgame theory, or whatever) at you. You read it, and will quickly realize that this completely unimplementable. Worthless, from your perspective. Yet, still, that GM beats your machine nearly every single time.

End of analogy. In my opinion, TA as she is practiced by the more competent traders in here, is as much of an art as it is a science (thanks to sgbett for that phrasing). It's difficult (though not impossible) to show that it produces statistically significant results. (http://www.farmdoc.illinois.edu/marketing/agmas/reports/04_04/AgMAS04_04.pdf) And even then, what is tested is only a tiny subset of what traders actually use for the TA: the purely algorithmic part, while in reality the algorithmic methods go hand in hand with intuition/human-optimized pattern recognition/etc. (like in the chess analogy above).

It really runs down to the following question, in my opinion: do you only accept knowledge and results that are produced by the full rigor of academic methodology, or do you allow for "conditional knowledge"... insights that appear reasonable to you, that you have personal annecdotal evidence for, and that you hope can eventually be proven to be correct in a more formal way.

Myself, I follow the latter approach: I believe I have tentative evidence that TA (as I practice it) works well enough, but I don't expect to be able to show beyond a doubt that it does work, because (as you already pointed out) the system underlying it is too complex (and not well enough understood yet) to formalize it to the point where the question can really be answered once and for all. Until then, I will continue using those methods, with tight risk control in place to avoid catastrophic failure should the methods "stop working" for me.

Well put!

I will also ask, who does the burden of proof fall on? Those of us that successfully use TA have all the proof that we need. The naysayers want proof that it works... It's very difficult if not impossible to prove either way. But it's the dismissal of something they don't understand which gets me. If you had a bad experience trying to use TA then maybe it's the execution rather than the idea.

The indicators we use are (for the most part) lagging, but most still show the change in momentum and force well before the actual change in direction of price. Many indicators show that one outcome is more probable than another. There is psychology behind the patterns that we pick out. EW is heavily based on psychology. Fibonacci (which I feel I have proven to work in my thread) seems random, but until it fails to produce, I will continue using it.

I think the burden of proof falls on the naysayer. This isn't like a "Prove the existence of God" thing. At least TA has something you can actually look at if you take the time to try.

How about when very successful traders like Thomas Bulkowski give their statistical results? For example, a falling wedge results in an upward breakout 68% of the time. A descending triangle results in a downward breakout 64% of the time.

http://thepatternsite.com/fallwedge.html
http://thepatternsite.com/dt.html

Is successfully trading those patterns "random"? ???

@Este Nuno -- what are your thoughts? From what you've said (just rhetoric, really), and in reality, empirical proof is lacking and must be. But that goes both ways.


I didn't say it proved TA works. I don't think empirical proof is possible. I said I started trading because I was successful in poker, which depends on similar statistical analysis. In my data set, Fib retracements, moving averages, certain candlestick patters, and momentum/volume flow indicators all hold statistical significance. And actually, I'm under the impression that a win rate does tell you about the EV of a given set of trades, assuming proper risk management.

Comparing TA that incorporates significant backtesting to "calling a naked gutshot on the turn" is empty rhetoric. That's plain for all to see.

If it's impossible to prove workability of TA by analysing TA itself, it still can be possible by analysing success rate of TA traders: if an TA trader can consistently demonstrate better than random results, TA works. Although such proof would be hard to get in practice, since most of btc traders won't be happy to submit their trade history to a nosy researcher.  :)

If the question of TA profitability is not theoretical, but practical one (should I trade using TA?), the answer is easy: you (OP) shouldn't. Because number of coins is limited, this is zero-sum game and for you gaining a btc only if somebody have to lose his. So, you can trade (doesn't matter, with TA or without) only if you are sure that you are playing with bigger fool less talented person, than you are. If you don't know who's the fool in the game, the fool is you (c).

Edits: grammar and politeness.   :)

Personally, I wouldn't need to accept anything close to academic rigor to even begin to accept that someone was applying a strategy that was currently working in the Bitcoin market. If someone was able to shoe me statistically that they had an algorithmic trading pattern that' produced results falling in 3 sigma/3 standard deviation range I would be more than happy to think that it's very likely that their strategy was currently producing results. I think generally in academia scientists look for 6 sigma results which is far more rigorous than I would ever need to see.

The thing that gets me the most is that if we took all the people here and on other forums who post about their TA strategies and gave them all a bunch of money to trade on a market that was actually literally just a random walk created by some programmed random function, no one would notice. They would all still use the same language, the same discussions, some people would be big winners and people would look to them for advice. It would be the same "it works till it doesn't".

"TA" can cover such a broad range of approaches that I would never dismiss everything classified as TA out of hand. But it's so vastly unlikely that anyone taking a non-quantitative layman's approach is getting information of value. Unless you know that there are enough market participants acting on the exact same "TA" and using that information to exploit their patterns. But that would never happen in any sufficiently large market.(It might have happened with the Yen in the 1980s or something like that but that's not really relevant)

I'm not saying that people can't get an edge on a market by understanding the underlying causes of what moves the price, and the psychological factors involved. My whole point is that people should focus on those two issues mainly. Your edge is going to come from understanding. And the commonly used TA doesn't do anything but exploit the human predisposition to seek patterns where they are none. Patterns are a mathematical construct that can be analogized and shown to be statistically significant. Having good results doesn't indicate anything really. It's vastly more likely you're just experiencing positive variance. Not to mention the fact that anyone trading with an upward bias in Bitcoin the last couple of years was going to make money in most cases. Focusing your time and effort on other areas would probably be more productive.

sing it, sister! :D

i don't argue often, but when i do, it's not against Mr Bulkowski. but hey, if people want to think it's all random, it's all good with me.... whatever.

That might be the most ridiculous statement I've ever heard in regards to TA.

In what context?

And something like this would be easy to check. First define quantitatively what a "descending triangle" and a "falling wedge" is. Likewise with "upward breakout" and "downward breakout". And then back test sufficiently large set of market data.

This type of stuff in particular is the worst part of this whole TA scene. Someone making outlandish claims backed up by laughable evidence trying to sell you their expertise.

I'd imagine the average person here would find this as silly as I do. I don't think most people here are on that level of delusion. I think a lot of people here probably just put too much faith in to patterns that don't actually give any meaningful information.

You continue in making valid points, but you chose to not address one of my points that was intended to be a direct answer to your concerns. I selected the chess/algorithmic chess example for a reason...

First, we need to distinguish two elements here,
1) statistical evidence that some traders "beat the market" in a way that is unlikely to be the product of pure chance, and
2) determining what is the reason for 1).

I believe 1) can be shown (though your requirement that it needs to be an "algorithmic trading pattern" is not necessary for that - it doesn't matter whatever cognitive process produces the result), and there are enough well known (public) traders outside of btc that provide evidence for 1). I know some economists have tongue in cheek referred to Warren Buffet as a "six sigma event", but that's ultimately just an admission of what a sad field it is they work in: physicists would take such an event as an opportunity to investigate alternative explanations, economists (more precisely: adherents of the EMH) seem to think by labeling something that goes against their predictions an outlier they solve the problem. /rant

Next step, what causes 2), is a lot harder, and your objection is valid of course: just because a trader beats the market significantly and uses TA doesn't prove that TA is the reason for that success. Which brings me back to my chess analogy: The often somewhat fuzzy sounding strategies written over the centuries on chess might seem useless to you, coming from a purely formal position. You will still note that almost all players that are at an extremely high level will use such (non algorithmic) advice in learning and training.

What to conclude? a) their success is due some other factor (and the strategy they learn is a "placebo"), or perhaps b) there is after all some, difficult to measure, effect of those "vague strategies" that gives players (and traders) a competitive edge.

To paraphrase: I think it is entirely plausible that, if implemented purely algorithmically, most TA would produce only barely significant results. That doesn't mean however it cannot work - I find it entirely plausible that TA mainly works by "sharpening" a traders intuition for the effects you mention yourself: market psychology and underlying causes. I would add a few more "fundamental market forces" (momentum, reversion), but in principle this is where we probably agree, if phrased correctly... I don't believe TA is a set of methods that work on its own. It is perhaps a set of tools that help the trader's human mind to read markets better than is usually possible without those tools.

Okay, I think I agree with you. Using some TA can assist someone who is mindful of the fact that the TA itself is not predictive but rather tells the story up until this point in time. Considering things like support and resistance and how and why you expect the market to react to future changes is good.

But I think the vast majority of people completely misuse TA. And I think it more than likely hinders anyone who doesn't understand that it's just another tool to help view the rate of change of a price over time. At least 95% of people probably waste their time and money seeking something that doesn't exist.

Agreed.

Whenever you read something like "according to the weekly MACD, you should sell now" or "according to my log linear model, you're super safe to buy in now", feel free to ignore the advice.

(Disclosure: I have made similar statements. Oversimplification is a habit that's hard to kick entirely.)

This. This is TA.

You say human action isn't quantifiable with patterns on a chart. I disagree. The field of psychology disagrees. Take a double or triple top. The price bounces of a resistance point two or three times, then falls. Now think about when you knock on someone's door. Do you knock eight or nine times? No. Two or three is sufficient to figure out there's nobody home.

To non-analysts these are simply lines on a chart. To students of TA they say a lot more, and the pictures don't actually matter, what matters is what they represent.

To use another analogy (and to argue that TA is more like an art than science), I could teach you music theory but it wouldn't necessarily make you a good musician. You would be informed, but playing Mozart or Scarlatti piano sonatas might not come easily. That takes years of practice and dedication, and even then you might have no ear at all and someone with a natural affinity to music (basically the ability to perceive it in one's head accurately without an instrument in front of them) would likely eclipse you very quickly with much less work invested. It is not the notes on the paper, it is interpreting what they represent.

In the same way TA requires good intuition, an understanding of human action, and the dedication (also obsession) of learning the markets inside and out, how/why/where they move and when, and mastering one's emotions. There are repeatable patterns that I've learned to recognize and it often feels more like art that science. I can't explain it, neither can I explain how I hear and recognize music intervals without a piano in front of me, or how I control/convey my emotions while performing. It's not very quantifiable on paper, but neither is what artists do. All I can say is that I'm able to make money doing it.

No, I do say that it is.

And anyone who thinks they have the ability to do so should be able to prove it. Even if only to themselves. Tracking and honest reporting of results should be a priority for anyone.

My main point is that the vast majority of people look to TA as some sort of fancy Rosetta Stone for unlocking the secrets of markets but it's not that at all. The average person should probably ignore TA for a while until they've really gotten to the point where they understand the fundamentals of the market that they intend to trade. I've seen someone come on a forum and sell 10k TA training packs to a 10 people wanting to learn trading and seeing the subsequent embarrassment of the people who paid for it. Since then I've taken an extra hard look at what most people using TA claim and it's just such a vast amount of bullshit that the average person really has no way to tell the difference between someone just making stuff up and someone truly using a good analytic approach.

I'm not saying good traders can't make money making use of a wide range of tools. I also think that there are lots of traders who probably have a good intuitive grasp on how a market works and think that its the TA that's making them money when they would probably do just as well with out it.

I shared my results to prove something, and those results were profitable, then others would copy it making my strategy less profitable. So there is no incentive. I have nothing to prove except to myself.

I do see your other point though. There are mountains of bullshit that are marketed to new traders, promising them huge returns with no work. You don't see that too much here (yet) but in traditional markets it's a huge business that preys on the ignorant. Of course there is no free lunch.

Even sites like stockcharts.com don't go into much detail about how to apply TA. They're simply a collection of definitions... what new traders may not understand is getting the basics down is more important than understanding a bunch of indicators... it's like jumping into the deep end of the pool before you've learned to swim. Start with Dow theory--there is nothing magical about it, it's simply understanding how markets work on a basic level. Work up to support and resistance, then moving averages, then reversal signals, maybe some momentum and overbought/oversold indicators... that's pretty much all I use to time the market. Even things like Elliot Wave analysis is too much for me. Maybe someday.

you keep ignoring the fact that traders are using back tested data. he just pointed out an example of someone displaying their data, and went on to say his own data confirms their conclusions. that's actually about ALL one can do--stay on the side of probability until the data no longer supports it.

all evidence is laughable. there is no proof to be had. so what are you arguing here? your position is no better proven than those in favor of TA. you keep accusing people of having laughable evidence, but your own evidence that any technical analysis is no better than "random" is completely non-existent.

Depends on what you are using. There are pretty obscure and dubious indicators people use, but as far as I know, MACD has been a pretty stong and reliable indicator if you depend solely on it in order to buy or sell when a new trend emerges.

Hey, thanks for deleting half of what I said and then straw-manning a single point I touched on.

I never said blindly follow Bulkowski – and it’s ridiculous for you to suggest that I was arguing that. It was a simple example of a statistical data set and how it could be used. What I said was that using back-tested systems is better than "random". I went on to say that I back-test my trading system.

You somehow turned that into a comment about snake oil salesmen. I am talking in the context of doing technical analysis -- not blindly following supposed experts.



http://en.wikipedia.org/wiki/Argument_from_ignorance


http://en.wikipedia.org/wiki/Philosophic_burden_of_proof

That's just like, your opinion, man.
http://shufflingdead.com/wp-content/uploads/2011/04/The-Dude.jpg

MACD, daily, is probably the most "vanilla" indicator used among btc traders, at least that's my impression. And it actually performs reasonably well, most of the time... let_me_backtest_that has thread in here where he backtested a "pure" MACD strategy, and the results weren't half bad, _especially_ if one considers that it reduced the max drawdown of your USD account substantially. In other words, even if it doesn't greatly outperform buy and holdin profits, it could be used to "protect" the USD value of your trading account. (Note: I don't really recommend anyone uses a pure MACD strategy).

Yeah, I'm talking about that backtesting-example/experiment! It actually is a vanilla indicator around here, I think that expression is exactly spot on when we're talking about MACD :D But much like Occam's Razor always suggests: It isn't always wise to use overcomplicated things.

Yes, I did forget to reply to the other part of your comment. Sorry. I got so caught up in addressing that website that it slipped my mind.

I wasn't using the poker analogy to compare to someone who uses proper statistically significant back testing  I've been trying to say that anyone who is not doing such things is very unlikely to be doing any better than random.

I didn't see any evidence on the guys site other than the fact that he claims all data is based on "perfect trades". Which makes me extremely suspicious that he's data snooping.



I'm not making any assertion here. It's not something I'm trying to prove, I just suspect that many people aren't benefiting as much as they think from using anything other than the very basics of TA.


Well I assume you would agree with me that anyone claiming extraordinary results should be able to provide statistically significant proof, no?

But to start with anyone describing their predictions in terms of a probability distribution is already doing much better than the average person misapplying TA.

That's fair enough. I can appreciate that.

I think the back-testing of various TA indicators is very interesting! If you take some well known indicators, you may really see that they can be helpful in doing informed decisions. But Even though TA is somewhat of a self-fulfilling prophecy, I think a lot of people are putting way too much faith in it!

This is something I hear a lot. I'm curious -- what makes people so sure of this assumption? It's not exactly something that one could provide any evidence for. :)

Yeah, it's difficult to prove, but: If a lot of people use common TA indicators (for example MACD, which is a very common one), then they trust that indicator. If the MACD now turns green or goes above a certain value, they buy., and others will as well - since they are using the same indicator (common ones). On the other hand, people also expect other people to act according to those indicators, and therefore anticipate their buys, and try to buy even earlier. It's somewhat of a self-fulfilling prophecy.