Technical analysis

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nekomatic
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Technical analysis

Post by nekomatic » Fri Mar 03, 2023 5:13 pm

Of share prices, currency exchange rates and so on . It’s a load of rubbish, isn’t it?

Isn’t it?
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lpm
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Re: Technical analysis

Post by lpm » Fri Mar 03, 2023 5:20 pm

Yep. Bollocks.

Except...

If enough people believe a superstition, superstitions can become self fulfilling.

Doesn't apply in the case, almost certainly, because there's no consistency in what one technical analyst says vs another. But in China there might be stickiness around a lucky number 8 or unlucky number 4.
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Re: Technical analysis

Post by Boustrophedon » Sat Mar 04, 2023 3:25 pm

Of course with enough computing power and a huge amount of data to trawl through, people will try to get an edge over others in trade by analysing that data and trying to make predictions.

Equally obviously if you found an algorithm that worked you wouldn't broadcast the fact, particularly in some markets, futures for instance, that are zero-sum games. If you win others lose.

Of course that algorithm might now not actually be known by humans as it will be the product of an AI learning system.

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Re: Technical analysis

Post by IvanV » Sun Mar 05, 2023 1:54 pm

Boustrophedon wrote:
Sat Mar 04, 2023 3:25 pm
Of course with enough computing power and a huge amount of data to trawl through, people will try to get an edge over others in trade by analysing that data and trying to make predictions.
Some people will do it, and by chance some of them will have some luck. So they'll think they've found something good. Until their luck runs out. As a friend of mine, who used to work as a stock analyst, said, if what you say is about 51% correct, you can make money, if your employers give you enough to play with. At 52%, you are goooood, or so it would appear.

The really dangerous thing that goes on in finance is that there are plays that make frequent small gains, which in the long run are balanced out by rare large losses. As the large losses come only at long intervals, you can forget that is what you are doing, and fail to provide for the losses. The alrge losses can often be devastating, if you have failed to provide for them, or they come sooner/larger than average - though it is probably hard to know what average is, black swans and all that. It is easy to make the mistake of overlooking that you are making money in the short run because that is what you are doing, because it is rather well concealed behind your strategy.

Technical analysis is contrasted to fundamental analysis. Fundamental analysis is about understanding the underlying business. An example of fundamental analysis would be the following. This good cheap substitute for Expensivium is now available, in certain major applications, so the producers of Expensivium are now going to make less money.

Technical analysis is just looking at trends. Some information about fundamentals will be implicit in those trends. But mostly it picks up the behaviour of other market participants. You might make a bit of money because the trends incorporate fundamentals. But from the behavioural aspect, you can only make money in the long run if market participants are (collectively or on average) irrational, and irrational in a sufficiently predictable way that your technical analysis detects some of it. There are reasons for believing that market participants are irrational. There are also reasons for believing that they may be irrational in a non-predictable way.

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Re: Technical analysis

Post by basementer » Sun Mar 05, 2023 4:47 pm

Some time ago, I think just before the dot com bubble rather than the GFC or the pandemic, there was noise about a technical tracker fund that would use algorithms from anti missile guiding to outmaneouvre the market. It was performing effectively on paper and was going to be launched Real Soon, then the market crashed and they abruptly stopped issuing press releases.
Money is just a substitute for luck anyway. - Tom Siddell

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