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Such articles discrediting TA are published time and again by
non-practicioners who never delved deep into the subjectand neither they
ever will. Their approach is to consider TA in a rather piecemeal
manner--like taking the Head & Shoulders pattern that too not in its
entirety--which by no means is not the right approach to investigate any
hypothesis or theory.
Initially, while being a fundamental analyst, I too used to dismiss it in
the same vein. Now having studied the subject and using it for professional
activities I am convinced it has got lot of value and is worth pursuing.
I have learnt to have an open mind and test any interesting idea thoroughly
before dismissing it the way even today TA is being dubbed as useless.
In this context, those who are willing to read such articles and/or
materials should read the latest and revised edition of Burton Malkiel's
'Random Walk Down the Wall Street' in which the author argues with renewed
vigour that both fundamental and technical analyses are useless. He also has
his own statistics to bolster his case.
By the Steven, you wrote that Wharton and MIT are about to start teaching
TA--when and in which program, could you just let me know?
Rajat K Bose
>From: "swp" <swp@xxxxxxxxxx>
>Reply-To: "swp" <swp@xxxxxxxxxx>
>To: <realtraders@xxxxxxxxxxxxxxx><realtraders@xxxxxxxxxxxxxxx>
>Subject: [realtraders] Tech analysis - waste of time? {02}
>Date: Mon, 29 Nov 1999 12:06:07 -0500
>
>I have not seen that paper, but the NY Fed has done studies on the head
>and shoulders too in the FX markets, and first said that it worked, and
>then that it did not. There is a big problem with head and shoulders
>studies in forex. A head and shoulders is not a head and shoulders if
>the volume components are not correct, it is not a head and shoulders
>and that info is not known for the FX market.
>
>The Fed's study, by the way, used things that no technician would call a
>head and shoulders pattern. I would not be surprised if the same can be
>said of this study. And, as I said, without volume, the pattern is
>almost meaningless.
>
>As far as moving averages, that is technical analysis too, so saying it
>does not work shows that these folks do not even know what they are
>trying to disprove. The London School of Economics did a paper years ago
>that also showed that moving average systems have positive returns that
>could not be possible if TA did not work and if random walk was correct.
>
>Wharton and MIT are set to start teaching TA because they no longer
>believe in random walk either. These guys are just barking up the wrong
>tree. Put them in with others for whom time has passed then by.
>
>---
>Steven W. Poser, President
>Poser Global Market Strategies Inc.
>
>url: http://www.poserglobal.com
>email: swp@xxxxxxxxxxxxxxx
>
>Tel: 201-995-0845
>Fax: 201-995-0846
>----- Original Message -----
>From: <RJones2279@xxxxxxx>
>To: <realtraders@xxxxxxxxxxxxxxx>
>Sent: Monday, November 29, 1999 11:31 AM
>Subject: [realtraders] Tech analysis - waste of time? {01}
>
>
> > Hi RT'ers,
> >
> > Read an interesting article here in England in the Investors
>Chroniclebased
> > on a paper :"Methodical madness: technical analysis and the
>irrationality of
> > exchange rate forecasts"(Economic Journal - Oct 1999)
> >
> > Have'nt read the original article but it studied the use of the
>popular head
> > and shoulders pattern as a predictor of currency movements( 6 leading
> > cuurencies against the US $ - 1973 - 1994) and found it to be
>useless.They
> > said that where pattern did give good results it may have been because
>of
> > self fulfilling prophecy as so many traders use the technique.
> >
> > They said that profits could be bettered by using much simpler trading
>rules
> > - MA crossover or when current price is above recent levels are two
>cited.
> >
> > Whilst the article studied the H & S pattern specifically the IC
>intimated
> > that a large part of tech analysis is a waste of time.
> >
> > Any comments?
> >
> >
> > Bob Jones
> >
> >
> >
>
>
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