Technical Analysis - Does It Work for Stocks?
Mitch
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one that has little difficulty in verbalizing one's thoughts. I also
believe you would not intentionally mislead anyone. When it comes to
technical analysis you don't know what you don't know. Visit John
Murphy's website"stockcharts.com". Read his archived posts and study
materials on TA. I believe he has a "free look" period" for new
subscribers. Bill Ellison, CFP, Greenville SC
Don in Tampabay
The reasons why we have variable based products and FIA is because of
computers and technology. A Random Walk is an old book. It still some
validly BUT was not written in our time. Today 48% of all trading on
the NYSE is programed (mechanical) trading. That my friend is just
another word for buying and selling based solelyof on technical
analysis. YES technical analysis works inconjuction with fundamental
analysis. To use one with out the other is liking buying a pair of
pants and then cutting one of the legs off. It doesn't work for most
people and advisers because they won't take the time to learn it. The
best place to start is with Point and FIgure charting by Dorsey Wright
and Associates (goggle it). Also look at Hanlon Investment
Management.
Don Cudney
Mitch
comment. Pleas understand that there is very little that I have not
explored or else I would not discuss. I like to live by the lawyers
creed "Don't ask a question that you don't already know the answer".
Bill I appreciate your comments very much. Many of you may not realize
that I used technical analysis quite a bit in my active management
programs. In fact I seriously considered becoming a Chartered Market
Technician (the technical analysis equivalent of a Chartered Financial
Analyst CFA).
John Murphy is a very well know chartist who has authored many books
on technical analysis. However, I am unaware of any research that
demonstrates his technical analysis techniques has outperformed the
indexes. Technical analysis (like fundamental analysis) provides us
insights into possibly explaining the past, but offers no superior
advice as to providing superior returns in the future. Perhaps you
have acquired some performance reports that show he (John Murphy)
managed money using technical analysis that outperformed a relative
benchmark? If so please provide it.
Technical analysis is certainly a field of study but to what end?
Without proven track records use of technical analysis is futile.
Please keep in mind that the study conducted by Brinson, Hood and
Beebower and the resulting white paper "Determinants of Portfolio
Performance" (a personal copy can be acquired at the Institute of
Charted Financial Analysts). Their study of 91 pension funds
demonstrated that market timing negatively impacted the returns of the
portfolios (less return and greater standard deviation).
It is important for us to understand that our efforts are best applied
to the areas that can most greatly impact the portfolio performance:
Asset Allocation. The same study concluded that 93.6% of return
variance is the byproduct of asset allocation decision.
Thanks.
Mitch
Random Walk Down Wall Street was originally written in 1973 but has
had 8 additional updated revisions with the last being in 2007. It is
the latest version that is included in the Personal Retirement
Planning Specialist course. The latest version actually covers many of
the most recent market events and proves that the theories introduced
in 1973 are alive and valid today.
You may be confused about what programmed trading really is.
Programmed trading is an automated trading process but is not simply
mechanical. We as regular investors and advisors don't have the
ability to see orders placed with the NYSE specialists, but they have
the amount of orders for individual securities different price levels.
Programmed trading is an institutional approach to executing the
trades they need to make for large portfolios. Imagine what would
happen is the Fidelity Magellan wanted to liquid a large position of a
stock (for example 5 million shares), would it be wise to place the
order at once or to work the trade in a controlled manner
programmatically. Program trading is simply an approach necessary for
working large trades into the market in a fiduciary manner. It doesn't
explain the reason for the trades.
Technical analysis is certainly a field of study but to what end?
Without proven track records use of technical analysis is futile.
Please keep in mind that the study conducted by Brinson, Hood and
Beebower and the resulting white paper "Determinants of Portfolio
Performance" (a personal copy can be acquired at the Institute of
Charted Financial Analysts). Their study of 91 pension funds
demonstrated that market timing negatively impacted the returns of the
portfolios (less return and greater standard deviation).
It is important for us to understand that our efforts are best applied
to the areas that can most greatly impact the portfolio performance:
Asset Allocation. The same study concluded that 93.6% of return
variance is the byproduct of asset allocation decision.