Does automated trading and technical analysis work?

Following on from the discussion at:

https://strategyquant.com/forum/topic/3255-portfolio-doing-well/

I thought I would create a new topic. 

I anyone wants to share views on this (does it work, here’s the proof) please do.  There’s no right or wrong answer, let’s keep it open minded and as scientific as we can.

Any links to myfxbook verified results appreciated, doesn’t have to be your own system, just something that proves real money is being made by traders over a number of years. My personal view is it can’t be done by using historical prices alone, you need an edge outside of just number crunching past data.  It needs to know the market sentiment now, and what’s happening in the near future.  Any ideas along these lines welcome.

If technical analysis alone worked, we’d be falling over forex millionaires down the pub. All I see is people getting rich selling courses and books and software.  If you ask where the rich forex retail traders are, they have all mysteriously gone silent on some exotic beach, never to reveal their success.

 

 

So my current conclusion is retail forex trading is a zero sum game.  Sure you might have an edge for a few months against the market, but your system will give it all back “when the market changes”.  You don’t know using TA when the market has changed, and by the time you figure it out you are in deep drawdown and have to close at a loss.

Show us what you’ve come with so far, and maybe the members here will try to improve upon it. Most of the systems generated by SQ have long periods of stagnation, so a few months isn’t going to tell you much of anything. Also, if you’re ignoring FA, you’re wasting your time. You won’t find an edge without incorporating FA into your trading.

 Also, if you’re ignoring FA, you’re wasting your time. You won’t find an edge without incorporating FA into your trading.

Hi,

How and in what way do you incorporate fundamental analysis (FA) into your automated trading and SQ?  This is something I’m working on at the moment.  Any ideas or guidance on this appreciated.

Regards,

Mike

My opinion is that statistical approach (pure technical) to trading is sufficient and it does not matter whether you daytrade, autotrade, do position trading or selling options. There is a opinion around that as soon as you get news market has already discounted it. But there are paid and costly services (news feeds) that can provide some type of edge depending on what you play (HFT, hedgers etc). I believe there is no need to ‘predict’ price movement using FA to have an edge. Marty Schwarz confirms that too

Did you make a complete transition from fundamental to technical analysis?
Absolutely. I always laugh at people who say, “I’ve never met a rich technician.” I love that! It is
such an arrogant, nonsensical response. I used fundamentals for nine years and got rich as a
technician.

Maybe when incorporating FA you may get some additional % to your WIN% but who knows 🙂

My opinion is that statistical approach (pure technical) to trading is sufficient and it does not matter whether you daytrade, autotrade, do position trading or selling options. There is a opinion around that as soon as you get news market has already discounted it. But there are paid and costly services (news feeds) that can provide some type of edge depending on what you play (HFT, hedgers etc). I believe there is no need to ‘predict’ price movement using FA to have an edge. Marty Schwarz confirms that too

 

 

Maybe when incorporating FA you may get some additional % to your WIN% but who knows 🙂

Hi Thomas,

Marty Schwartz had a seat on the American Stock Exchange in the early 1980’s trading stocks and futures.  So he had a view of trader activity and sentiment outside of blind TA.  Very different from a retail forex trader I would say.

If he could make money using price feeds and TA alone, why did he spend a fortune buying a seat there?  🙂

Regards,

Mike

And this is proof that quantitative trading does not work???? Marty schwartz and this story lol.

Odoslané z SM-G900F pomocou Tapatalku

Inefficiencies are driven by fundamental forces – not technicals. Purely technical driven systems are reactive instead of proactive, and therefore, they offer no edge to the retail trader unless he/she has access to order flow.

I actually don’t believe in SQ. I purchased it over a year ago and I wish I could get a refund.

SQ’s license is not transferable.

My hope for the future is that SQ4 is flexible enough to feed external data (indicator data if you like) from sources that are not derived from past prices.  Such feeds would include trader sentiment, economic news events and other such feeds. 

Aegis has hit the nail on the head, in that TA is reactive. I like my analogy of driving a car.  With TA you have to navigate a winding road along a mountain edge, but you are only allowed to look out of the rear view windows.

FA enables you so have some kind of view of the road ahead.

I think you are too negative. Do you have an evidence that TA and SQ doesnt work? The most of professional trader uses TA beside FA, why?

SQ is a very good program and its robustnost tests are great, better than Daniel Fernandez’ tools. By the way, I know him for about 5 years, he is clever and hardworking man.

Do you consider a length of stagnation and max DD in your strategies? It seams to me you create a strategy, run it and after several days/weeks you remove it, because it is not succesful. And again and again. I think the strategy needs more time to say how successful is it.

I sugest to send us you “unsuccessful” strategies and we will have a look, do tests of robustness and tell you our opinion…

I think you are too negative. Do you have an evidence that TA and SQ doesnt work? The most of professional trader uses TA beside FA, why?

SQ is a very good program and its robustnost tests are great, better than Daniel Fernandez’ tools. By the way, I know him for about 5 years, he is clever and hardworking man.

Do you consider a length of stagnation and max DD in your strategies? It seams to me you create a strategy, run it and after several days/weeks you remove it, because it is not succesful. And again and again. I think the strategy needs more time to say how successful is it.

 

I sugest to send us you “unsuccessful” strategies and we will have a look, do tests of robustness and tell you our opinion…

Hi there,

I’m not being too negative. SQ is a fantastic piece of software and has been invaluable to me.  I think the failings are not with SQ, but limitations of TA in the forex market for retail traders.  Maybe other markets work better with TA, such as stocks, indices, commodities. I don’t know.

I cannot prove TA doesn’t work, I was opening up a discussion around the limitations of TA alone.  As it stands SQ is a tool that relies on TA.  If TA alone doesn’t work, then SQ will never find strategies that are robust for more than a few weeks.

What does seem to be very rare is any kind of verified account in myfxbook that is consistent and with low drawdown.  Seems trading profitably without months of drawdown is a rare feat.

If anyone has any FA insights to share that might give TA and extra edge, I’d be interested to hear them.

I have built a couple ea’s that make some money, using higher time frames. No luck on the faster time frames.

Considering the work I have had to do to eek out some profits, I am not getting paid well.

I have been using 4 hour and 8 hour charts most of the time…… and plan to convert to daily charts.  I find that the longer charts offer to me a lower risk.

This EA works too.

The time period is 5 years.

http://www.wallstreet-forex.com/

This EA works too.

The time period is 5 years.

 

http://www.wallstreet-forex.com/

http://forums.babypips.com/newbie-island/53684-guide-using-recognising-myfxbook-accounts.html

4. Myfxbook uses gain and absolute gain.

Gain is a time weighted listed – ie: the gain from the initial deposit. The absolute gain is the overall return on investment (ROI). In my opinion this is the most important. The ‘gain’ can be manipulated by inserting $1 as the initial deposit. The trader then adds $100 at a later date and makes a further $100. The absolute gain or ROI is $100. The myfxbook will list the absolute gain as a little under 100%. However, it will list the gain as 100 000% because the account has gained $100 from an initial deposit of $1.

I bet you wouldn’t mind 

• Abs. Gain: +106.29%

This week I have missed the naysayers and the ‘it can’t be done‘ Brigade because they put a smile on my face.      

106% over 5 years?  Could probably get that from a bank account with compound interest at zero risk. 🙂

Tell me the name of the bank so I can deposit ALL my life savings in it.  Seriously, I hope (for your sake) you are joking  

Bank of Magic Unicorns. 😉