If Technical Analysis works, why isn't there a mutual fund for it?

[tek]

[ 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]

squif,

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

[wildwood]

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]

Didn't read the whole thread but almost every hedge fund uses TA.

[eastbay]

[ 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]

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]

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]

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]

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]

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.