Jul

28

 I disagree with Vic and Laurel's statements that they do not think Technical Analysis has a scientific approach. I can find strong similarities between technical analysis and well-established scientific theories. How familiar are the Specs with quantum mechanics and Schrodinger's Cat? Essentially, you have to imagine a cat in a closed box which is armed with a gun, you hear a shot go off and you wonder whether the cat is alive or dead. You then open the box but it is only upon opening the box and after the event that the cat decides whether it is alive or dead. This has been used to explain the behaviour of some subatomic particles and their "spin". They exist in both possible states until you try to observe them, when they decide to select a particular state. I do find technical analysis highly accurate but, unfortunately, only after the event.

Steve Leslie comments: 

Let us assume that technical analysis has a scientific basis to it. The author suggests that it only has usefulness in hindsight. The major question now becomes how useful is it as a tool in making money. If it is only effective in hindsight then it has no practical usage. If it can be used by only a few then it has great value to those who have discovered its properties. If it has intermittent usefulness then it can be dangerous in the hands of the one who is attempting to use it.

Therefore it may or may not have practical use depending on who is trying to use it. One cautionary note here. Emerson said "to a hammer everything looks like a nail." 

Venkatesh Chari writes:

As the sampling frequency increases (and time period decreases), you see more of a noise and less of a signal. Also, I don't believe that anyone can really forecast or predict anything. If anyone can, he doesn't need to be in the "investment advisory" business. He can become a perpetual money making machine.

All I am saying is that there are certain market patterns (not geometry-based like drawing lines, rectangles, etc.), which give positive expected returns. And these I believe can be scientifically tested. If you had bought the new high on Malaysia or Thailand you would have made a lot of money. Of course, this was just one path and I am telling this with the benefit of hindsight, but you could have always played the same idea with a tight stop. Keeping an open mind is good for our wallet! 

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