[2018-02-25] BITCOIN.COM - Trading Tip `The Wall´ – Meet the TA Gods

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Whether TA works or not is a topic discussed ad nauseam in cryptocurrency circles. As a cryptocurrency trader with a fascination for engineering, math and science, I backtested the entire spectrum of the most popular bitcoin TA indicators in early 2015 using the now defunct Tradewave-platform, in search of that magic formula that would allow me to make money on auto-pilot. I did not find it.

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Meet the TA Gods
Currently, I’m working on recreating a 2018 version of that experiment, the results of which I’m looking forward to sharing with you in a column post soon. However, I can already reveal that the results are not looking promising. I’ve long been disillusioned with the prospects of earning a steady income using predictive algorithms, to the point where I’ve stopped believing in them completely.

Trading Tip `The Wall´ - Meet the TA Gods

So, while I color myself a TA skeptic, I still tend to marvel at the near-surgical precision of which the market tends to move in certain cases. Observing the above picture, I’m yet again amazed to see the bitcoin price just reaching the descending trend line just under $12,000 before continuing its downward trajectory. How can it be, that while the empirical evidence for TA disproves its relevance, these TA bulls-eye calls appear again and again?


 
Look at the tweet above. That is just one of hundreds of such tweets I’ve seen in the past months; tweets listing various “TA Gods”, each with tens or hundreds of thousands of followers, who seemingly worship the chart analysis bestowed upon them by their holy prophets.

source : https://news.bitcoin.com/trading-tip-wall-meet-ta-gods/

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So, while I color myself a TA skeptic, I still tend to marvel at the near-surgical precision of which the market tends to move in certain cases. Observing the above picture, I’m yet again amazed to see the bitcoin price just reaching the descending trend line just under $12,000 before continuing its downward trajectory. How can it be, that while the empirical evidence for TA disproves its relevance, these TA bulls-eye calls appear again and again?

There is nothing to marvel at. It is called expectancy bias (https://en.wikipedia.org/wiki/Observer-expectancy_effect), more specifically:

• Post hoc analysis (https://en.wikipedia.org/wiki/Post_hoc_analysis) -- you search the data until you find something that looks significant, and
• p-hacking (https://en.wikipedia.org/wiki/Data_dredging) - you will find what you are looking for somewhere in the data if you search it well enough.

Another major contributor to the belief in pseudo-sciences such as astrology and TA is confirmation bias (https://en.wikipedia.org/wiki/Confirmation_bias) -- you notice the evidence that supports it, but ignore the evidence that refutes it. Street light interference phenomenon (https://en.wikipedia.org/wiki/Street_light_interference_phenomenon) is a great example of confirmation bias.