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08-12-2005, 12:59 PM
Let us suppose that there are a set of price patterns which can predict future stock prices. For example, if we see a "cup and handle" a stock will go up in the near future, and if we see a "head and shoulders" a stock will go down. If someone understood how these price patterns worked, why wouldn't they start an investment vehicle to exploit them?

Let's say this strategy can return 20%/year. If you limit yourself to investing with your own money, you're limited to 20%/year. If you start a fund (mutual fund, hedge fund, etc.), you can charge fees on other people's money and earn 20% on your own money and 2-10% on their money. If the fund consistently returns 20%, it would be flooded with hundreds of millions of dollars, resulting in enormous management fees.

So why aren't there dozens or hundreds of funds which exploit technical analysis to beat the market? There may be some funds which claim to invest on the basis of technical analysis, but to my knowledge none have consistently beaten the market in the way that Warren Buffett or Peter Lynch have. Anyone care to enlighten me?

wildwood
08-12-2005, 01:13 PM
Fundamental vs. Technical Analysis (http://forumserver.twoplustwo.com/showthreaded.php?Cat=&Board=stocks&Number=2820936& Forum=,,,All_Forums,,,&Words=&Searchpage=2&Limit=2 5&Main=2820936&Search=true&where=&Name=33261&dater ange=&newerval=&newertype=&olderval=&oldertype=&bo dyprev=#Post2820936)

Two comments:
1. Minds are like parachutes, they work better when open.
2. These forums are better served when we respect each other's opinions even if we don't agree with them.

08-12-2005, 02:09 PM
I read over the post you linked to. You name John Murphy as a technical trader you admire. Apparently he wrote a book in 1986 that is one of the classics of technical analysis. More recently, he started a mutual fund that engaged in technical-based trading. I can't find performance data on that fund because earlier this year, it merged with another fund. I can only assume that this was due to poor performance--successful funds don't merge. The fund it merged with, ETFCX, has underperformed the S&P500 by about 10% before fees since inception. That's not encouraging.

I'm trying to be open-minded about this, and if technical analysis works, I want to get in on it. It just seems like there's no empirical evidence that it can predict future prices.

Sniper
08-12-2005, 02:11 PM
Your post demostrates that you have no knowledge of how the market works. A large percentage of all trades made every day are based on technical considerations. The majority of funds and all the market makers are trading based on technical patterns. Program trades are triggered by technical patterns.

Fundamental analysis can not be used to explain daily and intraday price fluctuations.

08-12-2005, 02:32 PM
I have no doubt that the market is influenced by technical considerations. All day long in all different stocks, there's someone identifying the 200-50 moving average convergence/divergence patterns, and someone else finding narrowing trendlines approaching breakout, and all of them basing their trades on this.

What I doubt is that any of this is useful in predicting the future price of anything. So, please, answer the question in my original post: why don't we see one (or many) funds which strictly exploit technical analysis?

Certain trading strategies which do not depend on fundamental analysis may be able to be successful. However, these strategies depend on knowledge of how other major actors in the market will behave, or on very rapidly identifying arbitrage opportunities. None of them explicitly base their decisions on rules such as avoiding stocks below their 200-day moving averages, or shorting stocks which have broken the neckline on a head-and-shoulders pattern.

DesertCat
08-12-2005, 02:48 PM
[ QUOTE ]
Your post demostrates that you have no knowledge of how the market works. A large percentage of all trades made every day are based on technical considerations. The majority of funds and all the market makers are trading based on technical patterns. Program trades are triggered by technical patterns.

Fundamental analysis can not be used to explain daily and intraday price fluctuations.

[/ QUOTE ]

Only the last part of your statement is true. Fundamental analysis cannot explain price fluctuations, and neither can anything else, including technical analysis.

Warren Buffett has studied the stock market for almost 60 years ago, and tried almost every approach when starting out. Arguably, he's the most successful investor of all time. His conclusion is that technical analysis is hooey.

Personally, I don't doubt there are traders successful over the long term. And I don't doubt that they use technical analysis. But I doubt that TA helps them one iota, i.e. I'm betting their success is based on information they glean outside of TA.

wildwood
08-12-2005, 02:48 PM
If TA doesn't work for you, don't use it. It's that simple. This issue obviously pushes some hot buttons for you, something you may want to take a look at. It's not my goal to convince you or anyone else to use TA. As I said in my earlier thread, I use both TA and FA.

What is your goal here? Do you want TA banned completely? Shall we allow only those who believe in the fundamental doctrine to post here?

08-12-2005, 02:58 PM
[ QUOTE ]
It's not my goal to convince you or anyone else to use TA.

[/ QUOTE ] [ QUOTE ]
What is your goal here? Do you want TA banned completely? Shall we allow only those who believe in the fundamental doctrine to post here?

[/ QUOTE ]
You recently told someone in another thread: [ QUOTE ]
goog formed a head and shoulders on the daily and broke the neckline on the downside yesterday. Caution is warranted. The chart trend is down unless it it can close above 300 to negate the pattern.

[/ QUOTE ]
I want to have a debate about whether this is valid advice. If I told someone in a poker thread that they should always fold AA because Party is rigged to make them lose, I'd be called out on it. Same here--it sure looks to me like that's bad advice, and my original post gave an empirical reason why people should be skeptical of technical analysis.

bobman0330
08-12-2005, 03:09 PM
This is something of an ill-informed theory, so take it for what it's worth.

If TA is as widely accepted as has been claimed, there could be something of an "Emperor's New Clothes" phenomenon at work. If Stock X exhibits a cup and handle pattern, everyone "knows" that it will be rising soon, so everyone buys it... lo and behold, it goes up. Reverse it for the head and shoulders pattern. But if everyone "knew" that a head and shoulders pattern meant a stock would rise, then it probably would rise.

In effect, it's a mini-bubble or a mini-selloff. TA experts gain some at the expense of people who ignore the theory or people who are too slow to buy or sell. Long term price movements are of course determined by fundamentals.

wildwood
08-12-2005, 03:18 PM
[ QUOTE ]
You recently told someone in another thread:
goog formed a head and shoulders on the daily and broke the neckline on the downside yesterday. Caution is warranted. The chart trend is down unless it it can close above 300 to negate the pattern.

[/ QUOTE ]

Someone asked for advice on google. I don't follow the fundamentals of that company, so I gave them some technical advice on the chart pattern. It looked to me like the trend is down with the stock making lower highs and lower lows. (which would be negated on a close over 300) I don't know for sure where the stock will go, but I stated my opinion that I wouldn't own it here.

I think you put me in a TA box because of that post.

[ QUOTE ]
Ignore the technical analysis crap.

[/ QUOTE ] If you continue to post comments like this, then I'm not likely to have much respect for anything you have to say.

08-12-2005, 03:20 PM
I've thought about that, and I can't rule that theory out entirely. The problem with it is, whatever effect occurs should be predicted and pre-empted by sharp traders. Let's say a cup-and-handle pattern really does predict future prices, and everybody buys around the 5th day of the handle, causing the price to go up. Well, after I figure that out, I'll start buying on the 4th day of the handle, before the price goes up. Pretty soon everybody'll start doing that, and I'll have to start buying on the 3rd, and so on until there's no handle anymore.

The more predictive these patterns are, the greater the pressure to exploit them earlier and earlier, until the patterns are no longer predictive.

bobman0330
08-12-2005, 03:36 PM
A good point. How about this:

TA is basically parasitism on the trading actions of more informed investors. For example, the cup and handle pattern (I assume) results as an undervalued stock recovers. The really smart investors start buying when the stock is at the bottom of the cup, driving the price up. Once the price makes a minor recovery, investors who have been in the stock for a while and got "trapped" by the decline in price get out, causing a slight decrease in price, after which the company's strong fundamentals move the price ever upward.

Even if you lack the skill or information to target an undervalued stock, the information to spot a recovery pattern is helpfully assembled for you by the market.

I suppose this theory suffers from a lot of the same preemption problems as the last. Maybe the answer is just that dumb traders outnumber the sharp ones?

08-12-2005, 04:04 PM
Those are good points, too.

We could probably speculate all day about possible mechanisms for TA to work. A more basic question is whether it works at all. I see two ways of testing it.

1) Use historical data from 1990-2003 to identify price patterns which appear to predict future performance. Then test those patterns on data from 2004 to see if they continue to predict that performance. Some academic has probably done this, but I'm not aware of any such studies. The evidence presented in A Random Walk Down Wall Street strongly suggests that, although TA strategies can be developed which backtest successfully, they can't predict future movements.

2) Look around the real world for evidence that anyone is using TA as a successful strategy. As I argue in my original post, professionals who did so would have strong financial incentives to share their performance with the rest of the world, so if it's happening reliably, we should know about it. There are no such funds (if there are, someone please point them out to me), which is evidence against TA's usefulness.

Dan Mezick
08-12-2005, 10:31 PM
There may not be a mutual fund dedicated to techical trading systems. This does not prove anything about prediction of prices. The best technical system traders are typically trend followers. Many of them run hedge funds and are commodity trading advisors (CTAs).

You might consider John W Henry, owner of the Boston Red Sox, in your argument. He seems to invalidate it. Here is a place where Accredited Investors can actually expose money to systematic technical trading systems that seem to work.

Let's focus the discussion on John W Henry. Let's discuss his philosophy and results. Is he a freak of nature? Is his system simply lucky? No one wants to discuss the results of John W Henry. It's clear why.

I notice his approach does not attempt to predict anything at all.

John W Henry (http://www.jwh.com/home.asp)

squiffy
08-12-2005, 11:21 PM
Technical analysis is largely B.S. Stock prices generally follow actual and/or expected future earnings. To predict future earnings you need to understand the qualitative factors that bring the company success.

Sniper
08-12-2005, 11:25 PM
[ QUOTE ]
I have no doubt that the market is influenced by technical considerations.

[/ QUOTE ]

If this is true then you are simply refusing to believe what you already know to be true!

[ QUOTE ]
What I doubt is that any of this is useful in predicting the future price of anything.

[/ QUOTE ]

No one has a crystal ball, all you can do is use the knowledge that you can gain from price patterns to give yourself an edge. In much the same way as you can't predict with 100% certainty that you will win any given hand that you are dealt AA, even though it is fundamentally the best pre-flop hand in poker.

[ QUOTE ]
So, please, answer the question in my original post: why don't we see one (or many) funds which strictly exploit technical analysis?

[/ QUOTE ]

I did answer your question, technical analysis is used every day by traders at the mutual funds.

Read William O'neill for some great analysis on the use of both fundamental and technical analysis to put the odds in your favor. He has done extensive historical testing on what parameters all successful stocks share in common.

If you don't understand how other market participants play the game, you are shortchanging yourself, in the stock market and in poker!

Sniper
08-12-2005, 11:53 PM
[ QUOTE ]
Technical analysis is largely B.S. Stock prices generally follow actual and/or expected future earnings. To predict future earnings you need to understand the qualitative factors that bring the company success.

[/ QUOTE ]

Stock prices move based on supply vs demand. Charts show you the results of the daily battles between buyers and sellers. If you don't understand all the factors that participants use to make their buy/sell decisions you are shortchanging yourself.

To quote William O'neill: "Investors who train themselves to properly decode price movements on charts have an enormous advantage over those who either refuse to learn or just don't know any better... Fortunes are made every year by those who take the time to learn to properly interpret charts... Professionals who don't make use of them are confessing their ignorance of highly valuable measurement and timing mechanisms... Universities that teach finance or investment courses and dismiss charts as irrelevant or not important demostrate their complete lack of knowledge and understanding of how the markets really work and how the best professionals operate." - How to Make Money in Stocks (3rd Ed) by William O'neill p. 123

squiffy
08-13-2005, 07:35 AM
Fine. Give some specific examples in which technical analysis helps you make money in stocks.

Many people are really just trading on inside info, but not getting caught. I think they are just using technical analysis as a b.s. cover.

I don't doubt that there are trading patterns. For example, trading might slow at lunchtime or over the summer holidays, etc. Or stocks might jump based on info released in a CNBC news report.

But you cannot simply look at a chart pattern and predict future movements based on the chart pattern. You need underlying info about what is happening in the real world.

Real info. At 2 pm. CNBC is going to report earnings of Marths Stewart Living Omnimedia. Or at 2 pm. CNBC is going to report results of verdict. Etc.

Here is a loopy snoople squiggle doodle. Whenever you see that there is a 75% chance the stock will go up without regard to earnings reports, jury verdicts, etc. That's garbage.

Present some evidence.

I know fundamental analysis works. Last year ODP earned x dollars from y number of stores. They have a new CEO who has trimmed costs, increased advertising, opening stores in new areas, etc. So this will increase profits.

That's the kind of info you need to know.

You can test technical info by giving a technical analyst charts from the Australian stock market in an undisclosed time period and asking him to predict the movement of say 1000 stocks from 1940, 1950, 1960, 1970. He won't be able to do it with any kind of reliability or accuracy.

And if he could, he sure as hell wouldn't tell anybody how to do it!!!!!

Sniper
08-13-2005, 11:48 AM
[ QUOTE ]
Many people are really just trading on inside info, but not getting caught. I think they are just using technical analysis as a b.s. cover.

[/ QUOTE ]

ROFL... at this point, I'm not sure if this is a serious post or not!

In the grand scheme of things the number of people with access to tradable inside information is relatively small.

[ QUOTE ]
But you cannot simply look at a chart pattern and predict future movements based on the chart pattern. You need underlying info about what is happening in the real world.

[/ QUOTE ]

First, there are some people that trade chart patterns without knowing anything about the company they are trading, including its name.

Secondly, a successful trader factors many pieces of information into their decision making process.

[ QUOTE ]
Here is a loopy snoople squiggle doodle. Whenever you see that there is a 75% chance the stock will go up without regard to earnings reports, jury verdicts, etc. That's garbage.

[/ QUOTE ]

Do you also believe that EV charts are useless in poker, because any two cards can win?

[ QUOTE ]
And if he could, he sure as hell wouldn't tell anybody how to do it!!!!!

[/ QUOTE ]

This is just wrong... and your posting it on a Publishers website makes it even sillier!

squiffy
08-13-2005, 01:51 PM
Many examples of successful investors who use fundamental analysis and valuation. Warren Buffet, Peter Lynch, John Neff, Ben Graham, Phillip Fisher.

Show me the technical analysts who have made 60 billion dollars looking at charts.

How much money have you made from technical analysis?

tek
08-13-2005, 06:46 PM
[ QUOTE ]
If TA is as widely accepted as has been claimed, there could be something of an "Emperor's New Clothes" phenomenon at work. If Stock X exhibits a cup and handle pattern, everyone "knows" that it will be rising soon, so everyone buys it... lo and behold, it goes up.

[/ QUOTE ]

TA has been around since the 1880's, except for many decades practicioners had to use pencil and paper to draw charts and more importantly calculate technical indicators if they so chose.

Also, many "tape-readers" of the late 19th and early to mid 20th centuries were using a mental short-hand for TA, in a manner of speaking. Similar to keeping track of players' tendencies at a live poker table versus using pokertracker at an online table...

TA and tape-reading worked before any bandwagon possibilities existed. However, the modern TA may have a bandwagon influence insofar as actively traded issues are concerned. A chart and it's technical indicators will be more reliable in a high volume issue than a low volume because of the momentum and non-TA general market crowd psychology factors.

Sniper
08-14-2005, 12:23 AM
squif,

I suggest you read thru some of the books I've suggested on this forum.

wildwood
08-14-2005, 12:19 PM
This would make a good project for the original poster. There are approximately 8,000 mutual funds today. If you look at 10 funds per day, it will take about 2 years to look at all of them. (To be thorough, call the fund manager and question his/her methods) All the best.

therockofgibraltar
08-14-2005, 01:59 PM
Didn't read the whole thread but almost every hedge fund uses TA.

eastbay
08-14-2005, 03:32 PM
[ QUOTE ]

So why aren't there dozens or hundreds of funds which exploit technical analysis to beat the market?

[/ QUOTE ]

There are thousands of them. They're called hedge funds.

eastbay

DesertCat
08-14-2005, 06:50 PM
Using fundamental research to make investment decisions is identical to using the Theory of Poker to make poker decisions.

Using TA is more like making poker decisions based on a pattern mapper.

wildwood
08-14-2005, 08:11 PM
William O'Neil from IBD uses fundamental and technical analysis. He uses fundamentals to screen a list of stocks to buy, he uses stock patterns where price is breaking out to new highs on volume, and he uses technical analysis to sell because fundamentals always look great at the top.
Now only the better Technical Analysts make money, the ones who cut losses and let profits run. The same would also be true for fundamental side, and for those who use both TA and FA.
I see this discussion turning into one about whether FA is better than TA. Even if that's true, it doesn't invalidate TA as a tool for some people to make money and control risk. I don't understand why so many in this thread feel the need to discredit TA. If FA works for you, great! If TA works for you, that's great too. If you use both and it works for you, great again! The larger question I would like to ask is: Can FA and TA coexist peacefully on this forum or not?
edit: TA is simply about looking at supply/demand relationships using price/volume. Moving averages are used to filter out noise, etc.

therockofgibraltar
08-15-2005, 01:03 AM
well, I didn't say I believe that TA work. I just answered to the original poster who seems to believe there is no large funds investing with this style. He is simply wrong. Hedge funds are usually huge in size and many of them produce quite good returns when compared to volatility and almost all of them uses TA (sometimes along with FA).

Sniper
08-15-2005, 03:00 PM
Cat,

If you really want a comparison to poker...

FA is playing the cards.

TA is playing your opponent.

A smart player in either game knows that both are important.

wildwood
08-15-2005, 04:13 PM
John W. Henry, owner of the Boston Red Sox, is a long term trend follower. He traded a $16,000 account to over one billion dollars in a twenty year period. He does not use fundamental analysis. There is more than one way to make money in the market.

IlliniRyRy
08-15-2005, 06:25 PM
Of course technical analysis is used, just not in mutual funds. Mutual fund anaylsts only use fundamentals to pick their investments. Two words....hedge fund.

Sniper
08-15-2005, 06:43 PM
[ QUOTE ]
Of course technical analysis is used, just not in mutual funds. Mutual fund anaylsts only use fundamentals to pick their investments. Two words....hedge fund.

[/ QUOTE ]

Technical analysis is most certainly used by traders at mutual funds. Why would you think otherwise? When was the last time you read a fund perspectus?

DesertCat
08-18-2005, 12:55 AM
[ QUOTE ]
John W. Henry, owner of the Boston Red Sox, is a long term trend follower. He traded a $16,000 account to over one billion dollars in a twenty year period. He does not use fundamental analysis. There is more than one way to make money in the market.

[/ QUOTE ]

That $1B isn't all his money, he's a rich man because he has clients who pay him to trade. Most of his funds are trailing the S&P 500. And what he does is much more sophisticated than TA.

"I donít believe that I am the only person who cannot predict future prices. No one consistently can predict anything, especially investors.".
John W. Henry"

DesertCat
08-18-2005, 12:59 AM
[ QUOTE ]
Cat,

If you really want a comparison to poker...

FA is playing the cards.

TA is playing your opponent.

A smart player in either game knows that both are important.

[/ QUOTE ]

Flawed comparison. TA doesn't know your "opponent", because markets are made up of thousands of participants, all with unique goals, motivations and strategies.

The proof is that no TA practitioner can pass a basic test to prove it works. I.e. give a "chartist" a series of charts that have been cut in half, and have them predict the future price action of the stock. They'll do no better than random chance would predict.

I would advise if you think you are good at TA, to have someone give you that test and prove to yourself you know what you are doing, before attempting it with real money.

Sniper
08-18-2005, 04:17 AM
[ QUOTE ]
Flawed comparison. TA doesn't know your "opponent", because markets are made up of thousands of participants, all with unique goals, motivations and strategies.


[/ QUOTE ]

Not really flawed, that is simply what makes stock trading more complex than playing poker. You need to evaluate what many participants are doing, in the aggregate, rather than what your few opponents are doing in poker.

Your statement also proves out my point, that if you don't even acknowledge the strategies used by many of the market participants, you are playing at a disadvantage.

[ QUOTE ]
The proof is that no TA practitioner can pass a basic test to prove it works. I.e. give a "chartist" a series of charts that have been cut in half, and have them predict the future price action of the stock. They'll do no better than random chance would predict.

[/ QUOTE ]

TA is not about having a crystal ball, neither is FA. Its all about putting the odds in your favor and trading appropriately by letting your winners run when the odds work out, and cuttting your losers short when the better hand doesn't work out.

[ QUOTE ]
I would advise if you think you are good at TA, to have someone give you that test and prove to yourself you know what you are doing, before attempting it with real money.

[/ QUOTE ]

I've been trading for a long time now, and can say with certainty that TA is clearly a useful tool in my personal experience.

therockofgibraltar
08-18-2005, 04:23 AM
[ QUOTE ]
And what he does is much more sophisticated than TA.

[/ QUOTE ]

If you are using historical price/volume data to trade, you are doing TA.

It doesn't have to be charts. It could be using cointegration techniques to find deviations from long term equilibrium (stat.arb) or something else. It is still TA, it is just called differently.

At least that is how I see it. Looking at the charts is one way doing TA. Doing very math oriented econometric calculations from historical stats is another way doing it.

If you think it is like that --> there are many very succesful funds using TA.

therockofgibraltar
08-18-2005, 04:26 AM
[ QUOTE ]
They'll do no better than random chance would predict.

[/ QUOTE ]

That maybe so true, but I am just happy you can make a bundle of money even lower than that via good stops and money management/position sizing algorithms.

Dan Mezick
08-18-2005, 09:15 AM
I notice that the author of the thread does not comment on John W Henry, at least not in this section of the thread.

JWH is a long-term trend follower using TA as the basis of his method. Did I mention he paid $700 million for the Red Sox some time ago?

The existence of JWH and JWH success and the success of others like him does need to be addressed as part of any argument which states TA is invalid.

I notice I can invest in JWH's TA-based funds, just like any mutual fund.

JWH is very successful over a very long period of time. There is really no debate about the validity of his approach, which is systematic, long-term trend following based on TA.

Go Red Sox !

Dan Mezick
08-18-2005, 09:40 AM
The whole idea of predicting accurately poses large problems.

This is part of the thinking behind his comment.

JWH does not predict anything. He simply follows trends.

Most of this thread is about who has the more valid prediction model.

The need to be right (for example being right about a prediction) is a perennial snare that catches many 'traders' and 'investors' and empties their wallets.

It will be interesting to hear from some of the more experienced traders on this topic.

Predicting is not an essential task. What is essential is a willingness to follow a non-discretionary backtested method, long-term, based on expected value.

Sniper
08-18-2005, 09:50 AM
[ QUOTE ]
Predicting is not an essential task. What is essential is a willingness to follow a non-discretionary backtested method, long-term, based on expected value.


[/ QUOTE ]

Risk/Money management is far more important than any predictive model. Putting the odds in your favor is obviously better than flipping a coin. Proper application of Technical, Fundamental, and Sentiment analysis are all important tools to put the odds in your favor.

DesertCat
08-18-2005, 04:48 PM
[ QUOTE ]


JWH is very successful over a very long period of time. There is really no debate about the validity of his approach, which is systematic, long-term trend following based on TA.



[/ QUOTE ]

Most of his funds trail the S&P 500, it looks like what he is most successful at is keeping his investor's money despite his poor performance.

Trend following also worked great during the internet bubble, momentum guys bought what was going up and it kept going up. The problem is when it stopped, they were out of business.

Oh, and Henry had a 40%+ loss at one point last year. When the trend turns, it can really hurt, esp. if you are leveraged up.

Victor Neiderhoffer was one of the most successful traders, worked for Soros for many years with a strategy that produced consistant results year after year, until it blew up and he went broke (twice!).

Some of these strategies are like picking up nickels in front of bulldozers, easy money until the inevitable rolls over you. Stop losses don't work in a panicked market.

[ QUOTE ]

Go Red Sox !

[/ QUOTE ]

Well I can agree with that!

therockofgibraltar
08-19-2005, 01:41 AM
[ QUOTE ]
Victor Neiderhoffer was one of the most successful traders, worked for Soros for many years with a strategy that produced consistant results year after year, until it blew up and he went broke (twice!).


[/ QUOTE ]

He was also stupid /images/graemlins/smile.gif

Soros told him a couple of times that he will eventually go broke, Victor didn't believe him and went broke.

HIs strategy was to sell huge amounts of deep OTM-option --> you make money like 99 % of the time but you still have negative expectancy because when you are wrong, you are [censored].

I love those fat tail distributions /images/graemlins/grin.gif

BTW, Nassim Taleb has a opposite view. He likes to buy those. Usually you are wrong but when you are right, you win big time. The markets has to move greatly for you to make a profit with this system BUT they usually move further than everybody seems to believe --> you have positive expectancy because of this.

lastsamurai
08-19-2005, 03:40 AM
google search paul tudor jones.

Alot of mutual fund managers use a combo of technical and fundamental analysis...

MaxPower
08-19-2005, 02:25 PM
How do you define "work"? I don't think it works, but even if it did work that doesn't mean it is worth doing if there something else that works better.

Also, the fact that Hedge funds use TA is not proof that it works.

08-22-2005, 12:09 AM
There are tons and they do very well, check out here www.iasg.com (http://www.iasg.com) www.autumngold.com (http://www.autumngold.com)

08-22-2005, 12:19 AM
I make my living trading and base about 90% of my trades based soley on TA, perfect example of it in work http://ichart.finance.yahoo.com/b?s=WHAI.OB got a partial fill of 7k shares on the turn @ .29 and sold out .40 on the ma touch(+770) bought small 5k on double bottom for another .04(+200) then 20k on breakout @.42 and out again @ .51 avg (+1800)

I sure hope technical analysis keeps on being wrong cause if it actually works i might not make anything LOL

RedManPlus
08-22-2005, 01:53 PM
[ QUOTE ]
[ QUOTE ]

So why aren't there dozens or hundreds of funds which exploit technical analysis to beat the market?

[/ QUOTE ]

There are thousands of them. They're called hedge funds.

eastbay

[/ QUOTE ]

The term "hedge fund" is so debased...
As to be meaningless...
Since perhaps only 10-20% of "hedge funds"...
Actually employ a legitimate arbitrage strategy.

80-90% of "hedge funds" are purely "skimming operations"...
Meaning they take your 4 quarters...
Do some fancy dancing to turn it into $1.00...
And then charge you a fat fee for the priviledge.

Technical analysis is a scam...
Except in the sense that it's often "self-fulfilling" by the herd...
And is actually just a brokerage industry trick...
To make their salesman sound like market gurus...
And facilitate the transfer of wealth from your pocket to theirs.

Of the roughly 10-20% of hedge funds that are legit...
Most of these employ some form of quantitative analysis...
To engage in some form of bona fide arbitrage...
Or practice some form of "insider trading".

Most successful hedge funds...
Like the one run by Edward Thorpe...
Are invitation only or have a long waiting list.

rm+

/images/graemlins/cool.gif /images/graemlins/cool.gif /images/graemlins/cool.gif

08-22-2005, 03:14 PM
This could be the dumbest thread post/thread yet. I don't know even know where to begin with you, so I won't.

Moonsugar
08-23-2005, 12:15 AM
There are tons of mutual funds that use technical analysis. They re as good as the ones that fundamental analysis, on average. That is, they suck when compared to passive portfolios.

Moonsugar
08-23-2005, 12:22 AM
[ QUOTE ]
John W. Henry, owner of the Boston Red Sox, is a long term trend follower. He traded a $16,000 account to over one billion dollars in a twenty year period. He does not use fundamental analysis. There is more than one way to make money in the market.

[/ QUOTE ]

LOL, OPM helps a lot too...

Other People's Money

JWH is such a bad CTA in a world of bad CTAs

Dan Mezick
08-23-2005, 12:31 AM
I'm glad someone mentioned how VN went broke.

He continues to demonize trend following.

Dan Mezick
08-23-2005, 12:33 AM
Ya, like Warren Buffet never used OPM .... not. He stated in with that VERY young.

MaxPower
08-23-2005, 11:43 AM
[ QUOTE ]
Ya, like Warren Buffet never used OPM .... not. He stated in with that VERY young.

[/ QUOTE ]

Buffet doesn't run mutual funds. His wealth is not from commissions and fees.

08-23-2005, 02:32 PM
Wow, I'm surprised this thread went as long as it did. To try to narrow the focus a little bit, I want to make a distinction between technical analysis as it is practiced by individual investors and TA/quantitative analysis as done by the pros. As I said earlier in the thread, it may be possible to make money in the market without doing fundamental analysis; however, this requires heavy-duty quant to identify true arbitrage opportunities. Perhaps in-depth analysis of previous price movements might reveal some subtle and intricate patterns which can be exploited, as John W. Henry's fund claims to do (though he has lagged the S&P500).

The technical analysis which is provided as advice on this board and other investing forums generally consists of strategies like, "There's heavy resistance at 40, but if it breaks out, it could go to 50," or, "It's generally a bad idea to buy a stock under its 200-day moving average." This type of analysis seems woefully inaccurate and superstitious.

[ QUOTE ]
The whole idea of predicting accurately poses large problems.

This is part of the thinking behind his comment.

JWH does not predict anything. He simply follows trends.

Most of this thread is about who has the more valid prediction model.

The need to be right (for example being right about a prediction) is a perennial snare that catches many 'traders' and 'investors' and empties their wallets.

It will be interesting to hear from some of the more experienced traders on this topic.

Predicting is not an essential task. What is essential is a willingness to follow a non-discretionary backtested method, long-term, based on expected value.

[/ QUOTE ]
How can you say that predicting is not essential? The entire point of stock-picking is to choose which stocks will go up and which will go down in a given timeframe. I'm not saying that TA systems have to be right 100% of the time. If they were 1% better than chance, they'd be hugely profitable. If you could correctly pick where a roulette ball is going to land 1 in 10 times, you'd make plenty of money.

The real test is whether TA can predict future results. Anyone up for this challenge? Take a look at the entire stock market, and choose 10 or 20 stocks you think have the charts with the clearest indication of movement, either up or down. Post your predictions for whether the stocks will go up or down, and how long it will take for the movement to happen (e.g. 1 day, 1 week, etc.)

Depending on how many people take up this challenge, we'll likely have some better than 50%. We'll use multiple-comparison corrections to evaluate whether anyone was successful at p < 0.01.

08-23-2005, 08:43 PM
up almost another 2k today, guess this TA "stuff" doesn't work
LOL

therockofgibraltar
08-24-2005, 09:24 AM
luck...

or just according to your risk

08-24-2005, 11:05 AM
its statistically impossible to be lucky almost everyday for 5 yrs and +705 so far on closed positions today /images/graemlins/smile.gif

therockofgibraltar
08-24-2005, 01:18 PM
if you have 50 % chance to beat the market, then there is 3,125 % chance to beat the market five years in the row. So, if there are 10000 traders, you would expect 313 of them to beat the market in that period.

Maybe you are one of them?! /images/graemlins/grin.gif

No mean to tease you. I do sort of TA myself /images/graemlins/smile.gif

08-24-2005, 04:16 PM
[ QUOTE ]
up almost another 2k today, guess this TA "stuff" doesn't work
LOL

[/ QUOTE ]
Post your picks. I promise I won't steal them.

08-24-2005, 04:43 PM
In BRVO .59 out avg .66
In CXTI 2.98 out 3.30
+1700

08-24-2005, 04:48 PM
No, I mean post them as you buy them or short them, not after you've been successful.

Hey, look how successful fundamental analysis can be:
in MSFT Mar 20th, 1986 @ 0.08
out Dec 27th, 1999 @ 52.33
+$31,415,926
/images/graemlins/smile.gif

08-24-2005, 04:59 PM
If I did that there would be 50 posts a day on this thread, not gonna miss a potential op cause i was posting on a msg board lol, and if i was gonna make stuff wouldn't it be much cooler if i just said "out CLST +1.40 on Large shares on multiday" lol

Sniper
08-24-2005, 05:36 PM
This thread has been discussed to death.

I trade with hundreds of traders every day successfully trading using TA as one of our tools.

The proof is in the profits, and thats proof enough for me!

tek
08-24-2005, 10:46 PM
In CY at 14.55

Target exit: ~$16.50 by the end of Sep.

08-25-2005, 01:00 AM
cy coiling at resis

tek
08-26-2005, 01:23 AM
After the market Thursday:

CY's solar power division IPO (http://www.thestreet.com/_yahoo/tech/semis/10239795.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA)