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You can plot one or two moving averages on a chart but there is only a limited number of them that the eye can look at. I use a computer and my mind to find a strategy, having eyes are real helpful but they are not good strategy creators. Also where the average is, isn't important, so looking at it tells you squat. My posts discuss this.
Technical analysis in its commonly understood form is a quasi form of statistics that seems useless to me. It might make some sense if someone could put some objective facts behind the words of wisdom we see here. Technical analysis if such a thing is worthwhile has to be part of information or data science.
The fact that moving averages can beat the stock market is not a success story for technical analysis. It is impossible to discover why that happens with technical analysis as we know it.
Can you help answer these questions from other members on NexusFi?
I guess you have to be born into being a leveraged trader, because I haven't seen a real coherent explanation of what is going on with that. Personally I can't stand risk, thats why I do research. If my excessive fear makes me back away from greed, I guess its worth it.
I put the results of my research on here and try to explain exactly how I come to whatever conclusion I come up with. If that makes me a hack and you some kind of judge, so be it.
You are using technical analysis. You are using information generated from the market (price) to do your analysis. You're basically exactly the type of person I'm talking about in my first post. You are using technical analysis, but you want to call it something different because the term has a reputation.
I responded to the original post despite it's rather incoherent original paragraph. The second paragraph (I think) said that moving averages cannot be used effectively and that provoked me, because that is definitely wrong based on my recent research - and I'd even been posting my research showing this on here. My comments on charts were more theoretical and only made because that became part of the discussion.
It would be nice to be part of a discipline where there are some standards to get in. Imagine going to a mathematics forum and getting in an argument whether 2 + 2 = 4. Would you tell your wife you had an argument with another mathematician? This is something that deserves to be taken seriously and sometimes the ignorance and frivolity is annoying.
Yeah, that is a better explanation of what I was trying to express.
I'm writing a new article on Specter/FF5 on seekingalpha. Turns out it beats buy and hold for about 30 years being in the market half the time... early prototype. I'll start a thread with the link when it gets published. My stuff is difficult to read, but I don't think it is idiotic.
I think the word quantitative might be more what you're trying to describe. Meaning that there are precise calculations and rules that can be reproduced. Given the set of rules, every trader calculating them correctly would come up with the same results.
But I believe that quantitative strategies are less popular because the writer puts it into a backtester and realizes it doesn't work as well as they want. Something that is more difficult to program and leaves room for discretion ends up being used more often because it gives the trader more hope.
Which just circles back to the real debate with technical analysis. There's limited edge in analysis done solely with market generated information.
The major problem with commercial strategies is that they do not use natural log returns. If you don't use those there is no hope, at least for the stuff I do.
Backtesting is a big issue because usually that produces a trade listing which is weak. You should be able to go from directly from price history to strategy returns. Also the fixed timeframe in backtesting is a problem.
Its a cool subject when you get into it. It gives me more of a spiritual and artistic kick, you get to see God.
