Comments: Forex trading

True, TA is in my opinion only a way to make newbies think that there is a simple way to predict the markets. Then there is a more evolved form called QA (Quantitative Analysis), that unlike TA takes into account much more than past price/volume, but any other factor you can think of (GDP growth, interest rates...) and tries to find some sort of correlation within them using advanced statistical models. Success is mixed at best, with the best results coming from complex models that are regularly reassessed, it was actually one of the first applications for neural networks. It’s nothing that can be done with an excel spreadsheet… Although I spent the best part of my career watching long seasoned professionals wasting shitloads of time vainly running after the holy grail of models in an excel spreadsheet.

Think of it, if a reliable model existed, why would anyone teach it? They’d make loads more money running it…

The key to stock trading is “Know thy Company” or know its sector, and sticking to a disciplined investment process (to minimise the psychological effects of fear and greed).

Posted by Emir Attig at June 22, 2005 20:46

I practiced technical analysis for several years - it undoubtedly works on a probabilistic basis. Some patterns are those which people simply follow because they work and other emerge from the way mass psychology interacts with those patterns.

Frankly, there are so many people doing trading these days that you need to have the edge on them (and if you're new to it you don't).

The psychological side of it is the hardest though. The slightest bit of fear and greed (ever make £10k one day and lose it the next?) will throw out your system.

Posted by Dave at June 23, 2005 00:22
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