I was pretty much with you until the academic studies. I'm pretty confident that's not true but if you have a particular robust study in mind I'd be interested in looking at it. It's easy to "prove" (to your chosen statistical significance using statistical methods that aren't necessarily particularly relevant to the question) that certain strategies or certain definitions of support and resistance aren't predictive, but it's very difficult to prove that it's impossible to find a predictive (alpha generating) strategy.


It doesn't sound like you're even arguing that technicals aren't predictive, just that the signal to noise ratio makes it worthless to look at charts in more efficient markets with human eyes. But then you're not really disagreeing on anything but a subjective interpretation of what a decent signal to noise ratio is.

it's not really an argument about anything other than to troll people who use TA

back to markets:

wow, things are back to being very loose after those fed minutes. i got cold/flu from all the stress of trading 2 weeks ago, and am just getting recovered from all of that nonsense. i sorta want quiet markets the same way you learn not to touch a hot stove. i'm too old for this ****.

Been sitting on my hands for days now. Too gun-shy to short and way too nervous to go long. Weather here is unseasonably warm so I've just enjoyed being outside and working out a bit more. Seems better than losing trades.

f*** my life, it was a reverse alligator all along and I didn't see it coming

also shout out to gartman for continuing to be the best reverse indicator of all time. he got wrecked buying RIOT this week and just got stopped out of his longterm short, and stocks fell the moment he got "stopped out"

Support and resistance are such simple concepts though, easily measurable, with broad agreement on what constitutes them. If a signal existed, it would have been found. It's not hard to prove there's nothing to it, as most people use it.
I am arguing that technicals like support and resistance aren't predictive and are pure useless delusion. But since that's too high an intellectual bar for the superb minds in this thread who use TA, I'm showing them what a joke the signals are and how poor their noise correction is.

I mean, I've even had people argue with me above that random walks with strong TA signals aren't random walks! You think they've even thought about signal to noise, let alone applied it correctly, let alone being able to accept that the strong patterns they see everywhere are pure useless delusion? They can't even walk without falling over, so I'm pretty sure they ain't jumping the high bar to accept that last statement as obviously true, any time soon. Kiddie steps for now.

this thread is so much better with MSPaint charts lol

That's actually a common mistake by TA noobs like you. You missed the obvious:

Big fan of the alligator

Just a note to the ignorant masses. A lot of technical analysis has nothing to do with chart formations. I can't ever really remember making a trade based on a chart pattern? Support/resistance (very loosely defined)(both fading and playing breakouts), trends and momentum are a different ball of wax and how I make most of my trades. It is 100% technical but never relies on a chart pattern. For me its all about the momentum or lack there of.

Welp, lost all my money buying the MSFT alligator, internet being shut off at the end of the month. GL guys, it's been fun

Right, so you play momentum and not support and resistance. Thank you for agreeing with me. Momentum has some academic support, support and resistance do not.

You likely have a number of beliefs which are pure bull****/delusion. An experienced inflexible brain will never accept that, but it's highly likely. Support and resistance are probably two such delusions. If you're trading news/market conditions and momentum as well as your "technical" support and resistance, the latter could easily be pure bull**** if these delusions don't interfere too much with your actual alpha.

DISCLAIMER: I am not a financial advisor. My posts do not constitute investment advice.

@bigt2k4

Was it a rising or falling gator? You must have traded it wrong.

i am heartbroken to hear that idiot-yet-intellectuals with no actual skin in the game don't believe in support or resistance. sad!

They go hand in hand though. Breaking through support or resistance is often what causes the momentum as stops get triggered and weaker hands bail and the momentum picks up steam. I am more of a breakout player than a fader so I look to very loosely defined interday support and resistance areas as catalysts to bigger moves if they get taken out and then ride the wave. I also look to these areas to jump on a trend if they hold counter trend if the said trend is well defined.

Google random walk with drift

This is the first time, you or anyone else has said with drift. There is a difference between a random walk and a random walk with drift. Hence the reason you need the adjective.

The idea of a random walk having a drift term makes it...not so random in my book...

rand,

Is your claim that a random walk with drift is more predictable than one without drift because you kinda know which direction it's heading?

Wouldn't a random walk without drift be equally predictable? You still have a good idea of where it should end up, it just so happens to be not much of a change.

Like most TA indicators, the alligator pattern works best when it fails, and works even better when its failure fails.

In short yes to the first part, and no to the second.

One of the best and simplest ways to model a random walk is with the flipping of a normal coin (ignore edge cases obviously).

The second (random walk w/out drift) would only be true if there were some kind of relationship between flips. Like if getting 100 heads makes tails more likely on the next flip. This is a common mistake at the roulette wheel and why casino's display histories there.

You wouldn't know in the later case because (with a legitimately random walk) each trial is independent.

It is, interestingly enough, another point against random walks in the markets. Almost everyone with a clue talks about overbought and oversold. The idea of reversion to the mean. If markets revert to the mean (hint: they do) then the trials are not independent.

Coin flip trials do not revert to the mean. Their expected value is the mean, but if you actually flip a coin 100 times, the odds that you will get 50 heads and 50 tails is pretty low. If you do that 101st flip however, the odds that you will get heads or tails on that trial is still 50/50.

I'd love to know why a bunch of traders are discussing random walks (with or without drift).

If you believe it is a random walk without drift, then you should just avoid anything approaching trading since there is absolutely no edge to be had no matter what you do.

If you believe it is a random walk with drift, then you should be a buy and hold investor, because there is exactly 0% possible edge that can be gained over buy and hold.

By definition, if you are trading you either believe that 1) it isn't a random walk or 2) you aren't doing it right because playing craps is far more fun and they supply free drinks or 3) you are insider trading.

Please do not reply with your special definition of random walk that has absolutely nothing to do with what a random walk actually is.

Also, feel free to pile on. I went long SVXY today.

I think Tooth was trying to undermine the legitimacy of charting patterns by showing how they exist in random walks.

Rand is just being idiot by saying random walk with drift is more predictable than random walk without drift. I was waiting for hours for someone to roast him lol.