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A kind of a self-fulfilling prophecy, yes. However, there was a 1w EMA downcross at the end of october 2013. How did that work out?
(a) Maybe I missed it, but I don't recall TERA specifying exactly which weekly EMAs crossed over, so it's hard to tell if you found a bad signal or not.
(b) That said, even if you did, keep in mind, we're not playing 'mathematical proof' here, where one counter example is enough. We're playing 'is my stochastic system better than a monkey throwing darts'. And if a signal is, say, right 3 out of 4 times, and assuming you have some form of risk control in place (basically something that allows you to let profitable positions run, while cutting short unprofitable ones), then there's a chance you have a system that beats the dart throwing monkeys*.
* Details very much matter of course, so the above is nothing but the most high level description of why history based trading works even if individual signals go wrong.
Yes, you're right. I didn't want to question the use of TA in general, it indeed works in so far as that it gives you an advantage over noobs/sheep. Even if only works 51% of the time instead of exactly 50%, that is a win over random walk.
What I was questioning was the absolute certainty with which some people here seem to "know" what will happen based on some simple technicals.
The probability that something totally unexpected will happen is still brutally high!
I completely agree, if phrased like that.
* * *
In any case, here's a ultra-condensed version why some of us are so bearish/worried (or maybe secretly happy?) about a continued decline.
First, there's nothing special about weekly, imo. I'll make the following case based on 3d, because I get slightly more signals like that. My choice of EMAs is 'hand picked' to fit the history of the market in a certain way to make a case, I'm not going to pretend otherwise. I picked 3d EMA40 and EMA20 for this illustration. We have to go back to mtgox data to get a single, clear bearish crossover with those EMA parameters:
That bearish crossover happened approximately half-way (wrt time) through the 2011 bear market. Any further price swings didn't make the EMAs cross over again. (obviously, ignore everything right of the big red vertical line: that's the last chaotic period of mtgox trading, and can be ignored)
Now apply the same parameters to Bitstamp. Note that during the period where the data overlaps, the EMAs behaves similar, i.e. at the end of the last correction (mid 2013), the two EMAs got close, but never crossed over. Not surprising, since price was (almost) always highly correlated between the two exchanges.
Now, in the last week, there's finally another bearish crossover of the two EMAs.
The above is, in a nutshell, one of several reasons why some here are expecting a further decline in price.
Please note: Here's what I'm NOT saying: that it is /certain/ that we will go down further. Or that the number of signals I observed above give my method much statistical power. Or that momentum based trading is the alpha and omega of trading profitably.
Here is what I do conclude however: based on several technical signals (including, but not limited to the EMA/momentum one I showed above), there's the nagging suspicion that we are in a situation that is more like 2011, and less like 2012 or 2013.
Final note: if you would have traded based on the parameters above, i.e. sold at bearish CO in 2011, bought back again at bullish one, you would have made at most a minimal profit. So another claim I do *not* want to make is that you should sell now, and buy back when we CO again.
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