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This is an argument that is worth discussing, but this is the most
important point in my view. Stocks have no true supply or demand
factor, there is no intrinsic need for anyone to own a piece of
stock. While there is a need for commodities like corn, crude oil,
etc, this analysis can even be expanded to cover futures and their
initial creation for risk protection as a hedge.
Technical analysis works for supply and demand driven markets and
stock markets are random in nature due to its lack of supply and
demand dynamics so it leads to the thought why do you apply
technicals to stocks? Maybe luck and correlation of technical
analysis is one and the same in stocks.
One more thing about sample. If you take sample of losers
you will get a losing result, but if you take the sample of winners
you get winning results. I never understood why anyone would include
losers in a sample of trading success. That would be like taking a
sample of all the bad basketball players and small number of pros
and say that shooting a basketball into a hoop is luck not skill.
This is similar to this argument. Those who say trading is not
technical and luck just don't get it and deny the constant winners
of funds and those who utilize their technicals.
I also agre with Andy's statement, "By the way, that change in
fundamental/cyclical /noise relationship over long periods of time
is why I also do not believe that it’s helpful in back-testing
systems over “massive historical data”. Markets change and so should
the systems we use."
The funds have taken over the majority of control over the market
and that is why traders like Richard Dennis and the original turtle
breakout system stopped working in the early 90's. This is trackable
with the open interest available in futures and the increase in
volume in stocks.
KS
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