Are Technical analysts idiots?
- Thread starter rajeshn2007
- Start date
Hi all
Let me paste few abstracts from Dr.Alexander
A beginner entering the markets soon finds himself surrounded by a colorful crowd of gurusexperts who sell trading advice. Explore to know most are failed traders
Traders go through three stages in their attitudes towards gurus. In the beginning, they drink in their advice, expecting to make money from it. At the second stage, traders start avoiding gurus like the plague, viewing them as distractions from their own decision-making process. Finally, some successful traders start paying attention to a few gurus who alert them to new oportunities.
I know a lot of gurus who could not trade successfully but train traders.
Beginners love them, those who are more serious insist on doing their own homework, while advanced traders may listen to tips but always drop them into their own trading systems to see whether that advice will hold up
So make use of them
Nanjil
Let me paste few abstracts from Dr.Alexander
A beginner entering the markets soon finds himself surrounded by a colorful crowd of gurusexperts who sell trading advice. Explore to know most are failed traders
Traders go through three stages in their attitudes towards gurus. In the beginning, they drink in their advice, expecting to make money from it. At the second stage, traders start avoiding gurus like the plague, viewing them as distractions from their own decision-making process. Finally, some successful traders start paying attention to a few gurus who alert them to new oportunities.
I know a lot of gurus who could not trade successfully but train traders.
Beginners love them, those who are more serious insist on doing their own homework, while advanced traders may listen to tips but always drop them into their own trading systems to see whether that advice will hold up
So make use of them
Nanjil
Re: Are Technical analysts idiots? -Not really.
I agree with Nanjil, he's said most of what I wanted to say but he did it better. Here's my two pence worth.
Technical Analysts , particularly those featured in the media are not really idiots. They have a lot of pressure on them that distorts their opinions way outside the envelope called "A Correct Forecast".
One reason is that, in the end these are opinions and no one person can be expected to predict something as complex as the market correctly even 50% of the time. There are too many factors on which these guys can and do go wrong. If a guy can successfully call the turning points 35% of the time with conviction and trade it correctly, he'd be a millionaire many times over. He'd really have no need to appear in the media distributing his wisdom to people who might not trade it correctly.
Another reason is that Media by definition needs to abide by the rules of communication.
"Keep it brief, spicy and stupid." They need to serve the 80% of the people who do only 20% of their homework and sometimes not even that much. An anchor is supposed to get a punchy message across in a slot composed of 30 seconds. She'll do the intro in the first five or six seconds and then transition to the TA who'll have to
Many people know of really good TA experts who give good advice and I won't advertise them here. I'll only tell you what to expect when a TA is consulted.
Fortunately markets always make it clear in retrospect when a guy has called the turns correctly. Unlike life in general where you never know how right you have been at calling it's turns.
Sincerely
Paras Parmar
I agree with Nanjil, he's said most of what I wanted to say but he did it better. Here's my two pence worth.
Technical Analysts , particularly those featured in the media are not really idiots. They have a lot of pressure on them that distorts their opinions way outside the envelope called "A Correct Forecast".
One reason is that, in the end these are opinions and no one person can be expected to predict something as complex as the market correctly even 50% of the time. There are too many factors on which these guys can and do go wrong. If a guy can successfully call the turning points 35% of the time with conviction and trade it correctly, he'd be a millionaire many times over. He'd really have no need to appear in the media distributing his wisdom to people who might not trade it correctly.
Another reason is that Media by definition needs to abide by the rules of communication.
"Keep it brief, spicy and stupid." They need to serve the 80% of the people who do only 20% of their homework and sometimes not even that much. An anchor is supposed to get a punchy message across in a slot composed of 30 seconds. She'll do the intro in the first five or six seconds and then transition to the TA who'll have to
- deliver his message
- monitor the market/subject which may bite his hand and move opposite to his prediction
- face and satisfy viewers on the cross examination delivered by the anchor.
- Not every one appreciates being shown what's what by a pretty anchor. So they have to be pretty sure they don't make a fool of themselves on live TV .
Many people know of really good TA experts who give good advice and I won't advertise them here. I'll only tell you what to expect when a TA is consulted.
- TA will give you a Support (Best Buy price), Resistance(Best sale) and a target (best exit point) to aim for; one that he believes will fetch you atleast 60% of a trend.
- He'll give you the basis for his "view". This includes the signals that lead him to believe it's safe for you to enter the trade.
- He'll give you a Stop Loss that you should be monitoring closely and should take ruthlessly if it appears. This is a sign that the TA was wrong.
Fortunately markets always make it clear in retrospect when a guy has called the turns correctly. Unlike life in general where you never know how right you have been at calling it's turns.
Sincerely
Paras Parmar
Surprisingly almost the same post here
http://www.moneycontrol.com/india/messageboardblog/19/00/message_thread/1880230/2126833#m2126833
i will comment on this later
http://www.moneycontrol.com/india/messageboardblog/19/00/message_thread/1880230/2126833#m2126833
i will comment on this later
Spurious generalization. Crime of small numbers. Deducting content from noise.
Invalid induction: A friend of mine from California has poor eye sight, hence I expect everyone from California to have poor eye sight. (Read as "The technical analysis which appears on media is crap, hence TA is crap")
Valid Induction: That which is supported by hypothetical evidence. "After testing the eye power of randomly sampled Californians using statistical testing, I find the data on eye sight less powerful than those found in other regions in the US". (Read as "After testing and comparing the results of concepts based on TA with other concepts of stock analysis, I find TA less profitable than other concepts")
For this you need,
1) Quantitative definition of other concepts and data for the same.
2) Testable strategies based on these concepts.
3) Quantifiable results through controlled backtests.
Sincerely yours.
Invalid induction: A friend of mine from California has poor eye sight, hence I expect everyone from California to have poor eye sight. (Read as "The technical analysis which appears on media is crap, hence TA is crap")
Valid Induction: That which is supported by hypothetical evidence. "After testing the eye power of randomly sampled Californians using statistical testing, I find the data on eye sight less powerful than those found in other regions in the US". (Read as "After testing and comparing the results of concepts based on TA with other concepts of stock analysis, I find TA less profitable than other concepts")
For this you need,
1) Quantitative definition of other concepts and data for the same.
2) Testable strategies based on these concepts.
3) Quantifiable results through controlled backtests.
Sincerely yours.
Huge difference between Analysts and Traders.An analyst may help you analyze risk rewards,a trader takes decisions.
A good trader will always make a good analyst,not true for the reverse.
Analysis may be technical,as in levels,sloss etc or fundamental as in inflation,growth etc.Always hindsight and foresight required
Decision making is instantaneous,in realtime.
Taking these factors its unfair to paint them all red.
A good trader will always make a good analyst,not true for the reverse.
Analysis may be technical,as in levels,sloss etc or fundamental as in inflation,growth etc.Always hindsight and foresight required
Decision making is instantaneous,in realtime.
Taking these factors its unfair to paint them all red.
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