Bitcoin market efficiency - and technical analysis

[arabianights]

Clearly, the bitcoin market is not remotely efficient. It's thus plausible that technical analysis could work on it. The more squiggly lines on a chart, and the more indicators, the more I will be skeptical of that though.

On the other hand proper analysis of order flow I would be respectful of.

Anyhoo... have there been any proper studies done on this and if so where can I find them?

[adamstgBit]

Clearly, the bitcoin market is not remotely efficient

what makes you say that?

[arabianights]

wayyyyyyyy too volatile to have been reacting only to market fundamentals. Also, frankly, there is not enough participation or incentive to keep it efficient - reading this forum it's clear most people are trading off technicals and such trading, whatever its merits or lack of them, is hardly going to lead to efficiency

I could come up with many other reasons but those will do

[waveaddict]

wayyyyyyyy too volatile to have been reacting only to market fundamentals. Also, frankly, there is not enough participation or incentive to keep it efficient - reading this forum it's clear most people are trading off technicals and such trading, whatever its merits or lack of them, is hardly going to lead to efficiency

I could come up with many other reasons but those will do

high market efficiency and the benefit of technical analysis are not mutually exclusive

EDIT: furthermore, if you believe that the S&P500 is efficient, which you probably do, yet not trade-able thought technical analysis, then you really have no idea what you are talking about.

[ElectricMucus]

high market efficiency and the benefit of technical analysis are not mutually exclusive

EDIT: furthermore, if you believe that the S&P500 is efficient, which you probably do, yet not trade-able thought technical analysis, then you really have no idea what you are talking about.

The Efficient Market Hypothesis states that with available fundamentals known to all parties the market price has the same behavior as Brownian Motion, which is entirely (well for everybody except that parapsychological niche) unpredictable.
So all you can do if you follow the hypothesis is try to get exclusive fundamental information and model its impact as a probability.

I haven't seen any technical analysis which takes that into account, at least none commonly available, which is kind of suiting for the topic.  

[arabianights]

wayyyyyyyy too volatile to have been reacting only to market fundamentals. Also, frankly, there is not enough participation or incentive to keep it efficient - reading this forum it's clear most people are trading off technicals and such trading, whatever its merits or lack of them, is hardly going to lead to efficiency

I could come up with many other reasons but those will do

high market efficiency and the benefit of technical analysis are not mutually exclusive

EDIT: furthermore, if you believe that the S&P500 is efficient, which you probably do, yet not trade-able thought technical analysis, then you really have no idea what you are talking about.

Where did I say anything about the S&P500!?

[arabianights]

The Efficient Market Hypothesis states that with available fundamentals known to all parties the market price has the same behavior as Brownian Motion, which is entirely (well for everybody except that parapsychological niche) unpredictable.
So all you can do if you follow the hypothesis is try to get exclusive fundamental information and model its impact as a probability.

I haven't seen any technical analysis which takes that into account, at least none commonly available, which is kind of suiting for the topic.  

No it doesn't. No one with a brain believes market prices follow brownian motion.

There are models that assume it, chief amongst them black scholes, but market efficieny does not require any particular kind of movement at all.

[ElectricMucus]

Well what's the point of even using the term in the first place then? Either it follows a predictable pattern or not.
Do you care to give another explanation what market efficiency actually is?

[waveaddict]

wayyyyyyyy too volatile to have been reacting only to market fundamentals. Also, frankly, there is not enough participation or incentive to keep it efficient - reading this forum it's clear most people are trading off technicals and such trading, whatever its merits or lack of them, is hardly going to lead to efficiency

I could come up with many other reasons but those will do

high market efficiency and the benefit of technical analysis are not mutually exclusive

EDIT: furthermore, if you believe that the S&P500 is efficient, which you probably do, yet not trade-able thought technical analysis, then you really have no idea what you are talking about.

Where did I say anything about the S&P500!?

The S&P500 was more of an example to my previous point about technical analysis and efficiency

[arabianights]

But that requires some people to be trading fundamentally, and people trading technically picking up on them.

As everyone in this thread is trying to point out to me, despite the way it's blinding obvious to me (so clearly I  am not explaining myself) there really isn't enough info to remotely price bitcoins from a fair value perspective.

But I never wanted to discuss the efficiency of the market. What I wanted to discuss is whether anyone has done any studies on whether technical strategies are effective on BTC, and if so which ones, and where can I find the studies? Even a bit of backtesting would be a start.

[waveaddict]

But that requires some people to be trading fundamentally, and people trading technically picking up on them.

As everyone in this thread is trying to point out to me, despite the way it's blinding obvious to me (so clearly I  am not explaining myself) there really isn't enough info to remotely price bitcoins from a fair value perspective.

But I never wanted to discuss the efficiency of the market. What I wanted to discuss is whether anyone has done any studies on whether technical strategies are effective on BTC, and if so which ones, and where can I find the studies? Even a bit of backtesting would be a start.

  It looks like there was a giant miscommunication. In regards to your question:

Every technical strategy can work with bitcoin if you are aware of each one's shortcomings and strengths for various situations: Elliott Wave, MAs, channels, volume analysis, underlying technical analysis (MACD, RSI, OBV, ADX, etc.), etc. There is not just one that you can use successfully while forgetting about the rest.

I provide a service for this type of analysis if you are interested

[arabianights]

Absolutely any technical technique could be used if the oeprator understands what they are doing; unfortunately that can't be backtested (and nor, I humbly submit, can you seperate the raw operator skill from what the TA has given them - they may be usin g the TA almost as a "crutch" to back up their raw intuition).

To an academic that is a flaw, to a trader that is a feature, and that is why I don't think academia and traders will ever see eye to eye on this.

Nevertheless, there are technical startegies that a moron with no idea can trade that do work - none that I am aware of on the S&P 500 since you brought it up, but certain futures markets for example trend very well and could be traded off two moving averages.

It's these that I wonder if anyone has looked for. It would be a reasonably easy task to search for them given decent market data I would think.

[waveaddict]

Absolutely any technical technique could be used if the oeprator understands what they are doing; unfortunately that can't be backtested (and nor, I humbly submit, can you seperate the raw operator skill from what the TA has given them - they may be usin g the TA almost as a "crutch" to back up their raw intuition).

To an academic that is a flaw, to a trader that is a feature, and that is why I don't think academia and traders will ever see eye to eye on this.

Nevertheless, there are technical startegies that a moron with no idea can trade that do work - none that I am aware of on the S&P 500 since you brought it up, but certain futures markets for example trend very well and could be traded off two moving averages.

It's these that I wonder if anyone has looked for. It would be a reasonably easy task to search for them given decent market data I would think.

Gold was a beautiful example of what you are suggesting. For the last three years it bounced off the 150sma like clockwork up until the end of last year.

And yes, economists are always the worst traders, and I for one love to fade them. Once they see a trend or a 'new norm' then the trend is usually about to end and they almost always recommend buying at tops and selling at bottoms.

[ElectricMucus]

unscientific

all of this

*edit* this turned into the worst circle jerk on this board since long.

[CA Coins]

And yes, economists are always the worst traders, and I for one love to fade them. Once they see a trend or a 'new norm' then the trend is usually about to end and they almost always recommend buying at tops and selling at bottoms.

Nice one.  I think my brain is very much an economist.  (Thankfully, my code isn't). 

If you want to back test, you can try recording over time the orderbook from mtgox and do your own testing. 

And I agree, I doubt there is much fundamentals in the BTC market.  There is no GDP estimates, no interest rates, and non-speculative supply/demand is impossible to gauge.