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Yes, David Aronson's book is excellent reading, I would recommend it to anyone who decides to take up trading the markets with TA, if nothing else , how to recognise a mile away those "gurus" of Technical Trading!
Let's make one thing clear: it is not possible to predict the markets, no matter what tools are used:TA, FA, Cristal Balls. etc...
But having said that, it is possible to make money out of the market; hard but possible.
One of my favourite piece of software for trading the indices is the Automatic Pattern Search (APS) from Michael Harris; based on price patterns only, I have been able to dig out patterns with a 90% of profitability, amazing!
So, what's the catch? Simple; if I told you that the same pattern must be traded with a profit target of 2% from entry price and a stop loss of ...5%! Now, what would you think? Besides, over time, those patterns revert to mean, or simply stop appearing any longer.
Which is why Michael Harris, in his latest book "Profitability and Systematic Trading", gave a whole section to Risk and Profitability, where risk and money management are covered by something like 28 formulas; then, there is also a discussion on the pitfalls of backtesting.
You can make money with APS, but you won't become wildly rich overnight!
Now, coming back to David Aronson, anybody cares to tell me where in his book money and risk management are covered? Anybody cares to tell me how to use TA in those two topics, risk and money management? Anybody who actually has got a clue of what I am talking about? I know that Jose does - after all, I am using the tools he designed, and yes, they are based on TA, I wouldn't be able to use them on Metastock otherwise!
Yes, TA works, and so does FA; but without risk or money management you won't get very far; there are people who make money out of the markets, and yet their rate of failure is above 60% and even 70%!
Do you really think they'll take any notice of your charts, John?
Eduardo.
John Nicholson <johnnic@xxxxxxxxxxxxxx> wrote:
(I am attempting to attach several small graphs to this note. If I have
been unsuccessful, I'd appreciate the advice of others on how best I can do
so).
The following eight charts are broken into two groups. Four of the
(randomly placed) charts are actual charts of stocks covering a chosen 2000
day period on the ASX. The other four are totally random, i.e. they have
been developed using a simple random number generator that equates to the
toss of a coin to determine whether the price went up or down on any single
day over the 2000 day period.
Would anyone care to try and identify which are the four actual charts and
which are the random charts?
Please note that this is not meant to be anything more than a bit of fun. I
am not trying to make any particular point, although I might say that when I
borrowed this idea from David Aronson's book "Evidence-Based Technical
Analysis" and tested it for myself, I drew some conclusions that might be
considered heresy by some.
John
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