Quote:
Originally Posted by mark "twang"
OP,
In conjuction with my (limited) experience, it seems that the loudest posters in this forum have come to the consensus that TA is utter hogwash.
FYP
There have been many great TA vs Fundamental threads now long buried in the archives. I wish eboro was still around as he was TAs most eloquent defender. He only made 33 2+2 posts but all were pure gold. Here is a great link to some of his thinking.
http://forumserver.twoplustwo.com/30...92/?highlight=
What I consider the key passage:
"The definition and description of technical analysis based trading is often misunderstood, too. Make no mistake: the primary role of the technician and trader is that of a risk manager. Successful traders and technicians are "skeptics" by nature, always looking over their shoulders, assessing risk objectively, and then focusing on potential reward. Good technicians don't think: "If only we could predict these price movements, we could act upon them and become rich beyond our wildest dreams". Instead, they think: "Given the current state of supply and demand, what is the potential downside in this stock, and how does that relate to potential reward. Given the historical performance of a given pattern or formation in similar situations, what is the probability that the asset will increase or decrease, and do I have an edge in exploiting the setup". The investment game, as described by Michael Mauboussin, is a game of probabilities. Technical Analysis, in truth, allows individuals to approach the markets probabilistically, and objectively. Much like value investing, technical analysis is not about "buying at the bottom and selling at the top". For the technician, the idea is to buy when the probability is greatest that the stock is going to advance, relative to risk. Understanding areas of substantial shifts in the supply and demand in an asset allows one to do just that. The "Margin of Safety" that value investors so often discuss is also present in technical analysis and trading, but it is quantified in a much more visual way. Just remember, the value of technical analysis is not to predict every move, that is impossible. Instead, the idea is to make sense of price movement via market sentiment, and to act when it indicates that a certain scenario offers good expected value and controlled risk. Part of being a good trader is being patient enough to wait for clearly defined situations/setups...and those situations do arise."