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TrdStation@xxxxxxx wrote:
> He also argues that the reason these analysis work is because they have a
> sound fundamental and/or psychological reason they work. This makes sense to
> me because I see it in the very basic RSI Divergence system I use to trade
> options on equities.
<snip>
> So, I believe I see the reason it works and therefor can guess as to when it
> will not work and filter accordingly.
One could argue that the key phrase here is "guess as to when it will
not work". For a contrarian point of view, consider this from Bob
Brickey. It is a small part of a post to another list titled "True vs.
Random Indications".
> In forty hours or so of lectures I could explain to anyone with prior
> knowledge of algebra and trigonometry precisely why RSI and MACD have no
> predictive value. They would have no further interest in back-test results
> from those indicators, because they would clearly understand why those
> indicators cannot possibly work, except by chance. I can't make that
> explanation in an email or even a series of several emails, because there is
> too much to explain.
IMHO these divergences fit perfectly into Chuck LeBeau's prior post
about what you see is not what you get. The eye is drawn to divergences
that worked in the past and tends to ignore those that didn't work. If
one can write down rules for when they work and when they don't, one
should be able to code it into a profitable system. Has anyone been able
to do this? If one can't write down the rules, is he really doing
anything more than guessing?
--
Dennis
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