Technical Stock Analysis

[tupac chopra]

Problem with technical stock analysis is knowing when the market has peaked. If that information could be obtained then anyone could make a fortune from the stock market. Bad news - the stock market prices cannot be predicted.

Most technical analysis is not about predicting when a peak will happen, although you could see this in Elliot waves counts.
Most analysis, being trend based aims to tell you that the market already peaked. Once the market gives a sign it has peaked you can ride the trend.

FM: But isn’t that the point of trend-following—that you are not predicting, just defining a trend and taking advantage of it?

BE: That’s right. And if you look at me as a predictor instead of as a trader—as a trader I am way ahead, as a predictor I am scoring about 35%, so I am not very good as a predictor. Those are different skills. But still even with trend followers you will hear people say, “Where do you think the market is going?” It is just human nature to try and approach this in terms of making a prediction.

William Eckhardt: A Critical Turtle Trading Teacher

 

[Valjean]

Over the very long term, with no use of technical or fundamental analysis, one has a 95% chance of doing 95% better than all traders and investors regardless of expertise by simply investing in an S&P 500 index fund.

That's true; but it is little consolation if there is a large correction shortly before your planned retirement date.

Anyway, over the very long term, money is unnecessary. Nobody cares if yours is the wealthiest corpse in the whole cemetery.

So lay up thy riches in Heaven, then, where moth, rust and market downturns do not corrupt?

 

[NobleSavage]

Most technical analysis is not about predicting when a peak will happen, although you could see this in Elliot waves counts.
Most analysis, being trend based aims to tell you that the market already peaked. Once the market gives a sign it has peaked you can ride the trend.

FM: But isn’t that the point of trend-following—that you are not predicting, just defining a trend and taking advantage of it?

BE: That’s right. And if you look at me as a predictor instead of as a trader—as a trader I am way ahead, as a predictor I am scoring about 35%, so I am not very good as a predictor. Those are different skills. But still even with trend followers you will hear people say, “Where do you think the market is going?” It is just human nature to try and approach this in terms of making a prediction.

William Eckhardt: A Critical Turtle Trading Teacher

You are playing word games. If you spot a trend in the past and use that information to place bets on the future, you are predicting.

 

[tupac chopra]

You are playing word games. If you spot a trend in the past and use that information to place bets on the future, you are predicting.

Yes, that's true. I guess I was responding to the idea that one can predict a peak or a bottom in advance. I thought I saw that kind of idea here...http://talkfreethought.org/showthre...Stock-Analysis&p=120648&viewfull=1#post120648

Most analysis I've been familiar with tries to identify a peak or bottom afterwards rather than in advance. Some Elliot wave systems do though try to predict possible "peaks" or relative peaks in advance.
Head and shoulders patterns and other patterns do try also to have "price targets" where the pattern will complete which might be a kind of "prediction" I guess.

 

[Asha'man]

The trick to understanding the stock market is to recognize that it has almost nothing to do with actual financial indicators. What you really are predicting is herd psychology. You use technical analysis to see what other people using technical analysis are thinking. Your brilliant insight into the market is irrelevant, what matters is when a large enough crowd also starts to have the same brilliant insight. The people who push huge sums of money around every day, the ones that can drive market movements all by themselves, are a very small set of individuals living in a very small area. When 3-4 of them have lunch together, you can expect market movements based on nothing but their idle lunch chit-chat.

 

[Malintent]

You can chase the reitieration of this effect back to the present moment, and the upshot is that any algorithm that works will tell you to buy right now; and also to sell right now.

"... is a strange game. The only winning move is not to play".
-- WOPR a.k.a Joshua