Forum Archive Index - November 2001

["nick" <helmett@xtra.co.nz>]

     In defence of TA

 

    TWO CHARTS                                      /\

1.                                                2     /\  /    \

                                                    /\  /  \/

                                                   /  \/    

  / \   /\  /\  /                                 /

/    \/   \/  \/   

 

         Both these charts show what has happened, neither can tell the future. 

  However by looking at the patterns it is possible to see that chart two is

 more likely to go up.  Supposing this is true  66% of the time. 

     33% of the time of the time it will go down.  Therefore with the  use of

of good money management techniques it would be possible to make a profit.

       There will of course be losing runs, but providing you only use a small pecentage of your overall betting bank then in the long run you should come out ahead.  

   Its rather like betting on a toss of a three sided coin, two sides with heads

one with tales. A silly gambler might put all his money on one flip and lose the lot . The sensible person will spread the bets out knowing over time he will come out ahead. 

           THE DOWNSIDE

    The problem starts when either a) you have misread the percentages, ie didnt test the system out over a long enough period etc.

 b)  Sucess or a long losing run begin to affect your judgement resulting in poor decisions.

            Back in the u.k i used to be heavily involved in horse racing, even tried to make a go of it as a full time punter. I suceeded in that i was able to make a profit, where i failed was having trouble coping with the inevitable long losing runs.

They can be very confidence sapping even when you know that in the longrun better returns are made by backing horses in the 5-10/1 range.  There are many people who say there is no such thing as a winning system in horse racing. Believe me there are, many fairly simple,however making a  profit is only half the story.

What beats you isnt the odds but the emotions.

       Trading on the stockmarket could i imagine be just as tough, its sometimes hard enough just being a long term investor. When your portfolio has taken a hammering its hard just looking at the prices without feeling ill.

  Being a short term trader must be much tougher, imagine having a bad run where ten in a row go down and you lose your brokerage and are stopped out each time. What happens is doubt starts to creep in that your system may actually not work,you may become scared to act or find yourself predicting signals to get in earlier, in short your emotions may overide your objectivity. 

    Im sure it is possible with dedication and an iron will to make a consistant living using T.A  however anyone who sees it as an easy option dont be fooled. For every succesful trader there will be many who fail, and more thatn likely it will be because of pressure not because of huge financial loss

 

    Nick