Reversal chart patterns (technical analysis), CFA L1

[@bionicturtle]

@genesis213 great question because i have it myself. I personally have never used technical analysis to trade, although I am keen to keep an open mind i can't argue with the supply/demand tenet. Unlike my fundamentally-based videos, I do not have practical experience with TA and, frankly, in researching the topic, i find some equivocation to justify anything ex post (e.g., variations on head & shoulders + volume leave it wide open) ... these videos are b/c TA is in the CFA L1, fwiw

[@genesis213]

@bionicturtledotcom Thanks for response. I generally don't make short term trades which generally means I don't consider TA at all. From an efficient market hypothesis perspective there is also the assumption of rational investors, which there is plenty of evidence against, and when considering "Black Swans" there is the question of whether any advantage would be completely eliminated in a random event/outlier.

[@bionicturtle]

@mvogt I'm not defending TA (I don't advocate, I am a learner primarily). I agree with you w.r.t. outperformance research, but for my own investing, i have a lower standard: i would be satisfied to add a tool that might help me, anecdotally, avert a loss (I seek outperformance indirectly by minimizing losses). In a previous life i thought this was pure voodoo, but lately I have come around to the potential importance of volume in particular.

[@bionicturtle]

@genesis213 Some advocates of TA support by observing markets aren't efficient (EMH is not empirically justified). And I agree with that premise. But they often leap from (i) EMH is not valid to (ii) TA is valid. But this is an inverse fallacy: This is TRUE: If EMH --> TA is not useful (i.e., arguably the definition of weak form EMH) but this does NOT follow: if not EMH --> TA is useful (this follow: if TA is useful --> EMH is not true)

[@bionicturtle]

@genesis213 thanks, me neither don't make short term trades, it takes me forever b/c i keep wanting to research. Total agree re "rational agents" assumptions

[@genesis213]

@bionicturtledotcom It should be testable though, if you look for a random sample of stocks that meet the criteria for the initial formation of one of these patterns and then measure the outcome based on "target price". If the expected return is greater than 0 by a statistically significant amount taking into account trading costs. You could prove disprove they hypothesis. Though it would be hard to prove its not a self fulfilling prophesy driven by advocates who trade on the patterns.

[@mvogt]

I did not say prices were perfectly efficient, they are almost certainly not. But they are efficient enough that simple observable patterns you can find in any 5$ ebook on the net about TA can hardly yield an edge, especially not in markets with high liquidity. If you have statistically significant data indicating that any simple chart pattern can outperform the market, I would be more than happy to see it.

[@sutapamitra9900]

price target means where we should buy ???

[@genesis213]

How much support do these types of patterns have in practice? Are there actually people who trade successfully based on these patterns? My experience in researching these has been that they are highly unpredictable therefore not providing significant advantage, though I had not considered volume in looking for the patterns.

[@bionicturtle]

@mvogt I don't know, i've learned to keep an open mind. I do have experience w/ the higher math. It's strange what some geniuses do (e.g., employ advanced copulas where sensitivity of a single assumption renders a false precision). I almost fear "too clear by half" more than technical analysis. I used to the dismiss TA exactly as you do, but did you see the tenets? do you think supply/demand and behavior impact prices? I do. And that prices contain information. Its starts very reasonably.

[@mrbenl]

"head and shoulders" "volume".. kept making me think of shampoo for some reason

[@bionicturtle]

@nartiles thanks but you should see the BS i did filter out for you, to get it down to 5 minutes. But i see you are unhappy so i am going to issue you a refund ... oops ... nevermind

[@mvogt]

lol at anyone who is naive enough to think that you can outperform the market with this astrology like bs, when genius level mathematicians and engineers with state of the art technology using state of the art mathematics, signal processing, etc have trouble finding any edge in any market niche.

[@nartiles]

5 minutes of continuous uninterrupted pure and unfiltered BS!