Does Any Technical Analysis Work? (Part 3)

Today I want to continue discussing some other internet opinions I’ve found about whether TA can actually work.

     > There are a lot of people giving signals to buy or sell based on some
     > indicator or price pattern. There are a lot of people selling courses
     > about how to make profit trading using these well known strategies.
     > And I don’t mean a really… [obscure and esoteric genius strategy]…
     > I mean all these Fib retracements, RSI, MA, etc. I can’t understand why
     > those strategies exist. They are public and they are easy to implement
     > with a bot, so they cannot work right?
     >
     > No you’re not missing anything, if it worked it wouldn’t be on sale.
     > But that’s not a wholesale indictment of TA. [5]

Lots and lots of empty claims exist out there with very little supporting data. All this is to say we need to generate the data ourselves. We need to test everything else run the risk of being duped by something that sounds good and is marketed well.

A “bot,” by the way, is a computer executing algorithmic trading code.

On one forum, I saw someone repeat my observation given in the second paragraph of the above-linked post. Here is another’s response to that:

     > You must be joking man, there are a lot of people selling books on
     > how to lose weight! Good grief! [6]

Made me laugh!

Not only is this a great analogy, though, I suspect it may be true. Judging by how many diets have crossed the screens and shelves over the years, how many can really be said to work? Different diets work for different people here and there, but most diets probably have a low success rate overall. The same is probably true for TA because emotionless systems are very hard to maintain through times of famine and decline. Unless someone has done thorough trading system development, fear will probably own the day forcing said trader to sit alone on the sidelines licking psychological wounds from locked-in losses.

I will continue next time.