Forum Archive Index - October 2003

["Steve Moxham" <steve@stevemoxham.com>]

Greg Smith wrote:

 

In the big debate there is one point which I believe has been overlooked as
to why TA is successful.

When a share breaks out of a decline this creates buying orders from all the
TA advocates which can cause the share to rise markedly thereby proving to
the TA people that their system works.

Conversely when a share breaches its support level this creates a large
number of sellers thus again proving that TA works.

TA is self fulfilling

 

But then again, the phenomenon would had to have been observed prior to formulating this rule of TA. Widespread acceptance of TA merely exacerbates previously observed phenomena, it doesn't create them. Albeit a false signal that triggers buying or selling purely on the basis of TA will have the effect of temporarily distorting the level of supply and demand. TA only attempts to identify changes in trend. It doesn't purport to explain the reasons behind it, nor does it purport to be the underlying causes of that change.