why charts dont work

Ray Zee · #1 10-25-2002, 11:14 PM

i hate(love) to burst some bubbles here. but charts are only good for wiping you butt with when nothing better is around. they only reflect what happened in the past and give little or no info for the future. thats my opinion. if the charting could work then it would be easy to make a program that took each stock and applied some algorithm to it and find a pattern that could be exploited. it hasnt happened because it doesnt work. so its back to fundamentals which determine what a company will earn in the future.

scalf · #2 10-26-2002, 11:32 AM

[img]/forums/images/icons/wink.gif[/img] charting...technical analysis...is an art not a science; it's ok by me if you think past volume and price figures can have no meaningfull correlation to future price movements...(essentially that is my succinct interpretation of your outlook ray, correct me if i am wrong)....however, i say there are correlations between past patterns and future price movements...it's just how much and how to apply this info; there is no doubt in my mind that it's hard work, you gotta know how to limit losses, and use good money management...there is no doubt in my mind that when a stock hits a gartley pattern(for example), there is at least a 10-20% ev long term...just like playing a physically altered roulette wheel...it's there...but not every one likes charting...just like ford vs chevy...apple vs ibm clones...pepsi vs coke....fundamental vs technical...jmho..gl [img]/forums/images/icons/grin.gif[/img]

PokerBabe(aka) · #3 10-26-2002, 01:21 PM

There are "highly correlated" patterns in trading "broad" indices, for sure. However, occassionally, some statistical "anomoly" occurs, blowing your entire model. And THAT is why charting can be deceptive and down right wrong. Over time, however, the bell shaped curve lives and regression analysis overcomes all the variance!. LGPG, Babe

Mark Heide · #4 10-26-2002, 02:27 PM

Ray,

I basically agree with you. Using fundamentals and economics can provide the best information for investing. But, charts are useful. For example, look at the S&P 5000 since '97 (here's a link):

http://www.quicken.com/investments/c...;p=INDEX%3AINX

If you notice for the Oct to Jan quarters were all gains with the exception of Oct 2000. If you were to just buy the S&P 500 every year at that time you would make money. Futhermore, you would do even better if you only purchased the index when ecomomic and political conditions were favorable.

I hate(love) to burst your bubble, but you still have poor taste when it comes to food. Someday, you may get lucky and come to Chicago and eat a good pizza. [img]/forums/images/icons/grin.gif[/img]

GL

Mark

#5 10-26-2002, 04:19 PM

Sorry, Ray, but YOU couldn't be more mistaken. Of course a chart represents the past and you have to trade on the "hard right edge," but what better way is there to identify support and resistance levels while at the same time being able to compare that to the volume.

Fundamentsls, as you say, are all in the chart. News is worthless, because it is in the chart as well. Everything you need to know is in the chart, and you must use several different time frames. Monthly, weekly and daily.

Someday you'll figure it out.

adios · #6 10-26-2002, 04:58 PM

I'm not aware of any studies that show that charts are actually predictive of future price movements in a way that you could reliably "beat the market." Not saying that there aren't any, just saying that I'm not aware of any. Also I'm not sure of this either, but I'm fairly certain that studies have shown that support and resistance are basically bogus concepts as well. Perhaps I'm wrong but it seems that for a method to be valid, it's application has to reliably beat the market. Of course the same could be said for fundamental analysis most likely. I'm sure Paul could enlighten us.

PokerBabe(aka) · #7 10-26-2002, 09:46 PM

Mark- you are right- the pizza in Chicago is awesome [img]/forums/images/icons/tongue.gif[/img] LGEG (look good, eat good). Babe

Ray Zee · #8 10-26-2002, 11:54 PM

how about a analogy to poker mark. what if you raised in the dark every time you were going to get a big pair. isnt that like what you just said. picking out winning quarters looking backward and saying if you bought them you would have done well.
see you in chi town pal.

Ray Zee · #9 10-26-2002, 11:57 PM

babe, the problem lies in that mark cannot find the real good pizza places in chicago. i was going to go there this year to visit him for good eating. but the grapevine told me i would just end up with frozen crusts. the poor guy thinks spagetti o's is a great italian dish.

PokerBabe(aka) · #10 10-27-2002, 10:37 AM

Well, tell Mark to do a search for good pizza places on that Quicken program he's always talking about
[img]/forums/images/icons/grin.gif[/img] [img]/forums/images/icons/laugh.gif[/img] . LGEG, Babe.