New Paper Says That Chart-Obsessed Technical Analysis Traders Are Fantastic At Losing - News and Current Events | futures io social day trading
futures io futures trading


New Paper Says That Chart-Obsessed Technical Analysis Traders Are Fantastic At Losing
Updated: Views / Replies:173 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

New Paper Says That Chart-Obsessed Technical Analysis Traders Are Fantastic At Losing

  #1 (permalink)
Elite Member
Aurora, Il USA
 
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
 
kbit's Avatar
 
Posts: 5,872 since Nov 2010
Thanks: 3,301 given, 3,332 received

New Paper Says That Chart-Obsessed Technical Analysis Traders Are Fantastic At Losing

There are two schools of financial market analysis: 1) fundamental analysis, which is concerned economics, financial statements, earnings, and anything else that you would assume would justify a value in a real-world sense and 2) technical analysis, which attempts to forecast prices by studying past price movements.

Fundamental and technical analysis aren't totally mutually exclusive. But the folks who focus on the latter are more easy to identify as they dedicate a larger amount of their time pining over charts.

Fundamental analysts tend to spend more time bashing technical analysts than vice versa. So, they were probably happy to hear about a new study challenging the merits of technical analysis.

FT Alphaville's Dan McCrum alerted us to the paper modestly titled "Technical Analysis and Individual Investors" by Arvid Hoffman and Hersh Shefrin, who use transaction records from a Dutch discount broker from 2000-2006.

By considering actual trades, the authors are able to consider the very real impact of behavior biases. Indeed, the authors conclusions appear to be more about psychology than technical analysis itself.

"We find that individual investors who use technical analysis and trade options frequently make poor portfolio decisions, resulting in dramatically lower returns than other investors," they write.

"Overall, our results indicate that individual investors who report using technical analysis are disproportionately prone to have speculation on short-term stock-market developments as their primary investment objective, hold more concentrated portfolios which they turn over at a higher rate, are less inclined to bet on reversals, choose risk exposures featuring a higher ratio of nonsystematic risk to total risk, engage in more options trading, and earn lower returns."

The authors quantify the underperformance:

The magnitudes are economically important: controlling for concentration and turnover, the marginal cost associated with technical analysis is approximately 50 basis points of raw return per month. Turnover associated with technical analysis adds a further 20 basis points per month of cost. Concentration adds an additional 2 basis points.

And it's worse for people who love to trade:

A major finding from our study concerns investors who both trade options frequently and use technical analysis. For “high derivative rollers,” the marginal cost of technical analysis from poor portfolio selection is 140 basis points, not the 50 basis points which we find for the full sample of investors, with turnover linked to technical analysis adding an additional 29 basis points of cost. Importantly, we find that outside the group of high derivative rollers, the average cost of using technical analysis is small and not statistically significant.

The paper does not appear to be rebuking technical analysis itself. Rather it seems to be more about the psychology of those who employ it. Here are the authors:

Our paper makes three contributions to the behavioral finance literature on individual investors. First, we find that the choices of investors in our data using technical analysis are consistent with the behavior of subjects in experimental studies who use price charts. Second, we find that the behavioral traits of investors using technical analysis are similar to those which the literature links to excessive optimism and overconfidence. Third, we find that high derivative rollers who use technical analysis and have speculation as their primary investment objective exhibit the same behavioral traits as investors who favor lottery stocks.

"The general advice from behavioral finance for individual investors is that they restrict their attempts to beat the market, and instead invest most of their portfolios as if markets were efficient," the author write in their conclusion. "Doing so helps them avoid shooting themselves in the foot as a result of falling prey to their own psychological vulnerabilities. Our findings suggest that this advice is apt for individual investors using technical analysis, especially if they are trading options online through a discount broker."

Read more: Technical Analysis And Behavioral Biases - Business Insider

Reply With Quote
The following user says Thank You to kbit for this post:

Reply



futures io > > > > New Paper Says That Chart-Obsessed Technical Analysis Traders Are Fantastic At Losing

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Technical analysis of P&L graphs Seahn Elite Automated Trading 4 September 14th, 2013 05:24 PM
Technical Analysis free e-Newsletter trendisyourfriend Emini Index Futures Trading 12 May 24th, 2013 06:28 PM
Technical Analysis Humor DarkPoolTrading Jokes 0 August 31st, 2012 06:48 AM
Technical Analysis Library with 200 indicators sigjanu Platforms and Indicators 1 March 17th, 2011 12:53 PM
AUD/USD technical analysis TraderDTS Currency Futures 3 February 1st, 2010 06:43 PM


All times are GMT -4. The time now is 08:34 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-16 in 0.08 seconds with 19 queries on phoenix via your IP 54.160.245.121