How to prove that technical analysis is effective?

The definition given by John Murphy, the author of "Technical Analysis of Futures Market": Technical analysis is the study of market behavior with the purpose of predicting the future trend of market price changes and using charts as the main means .

"Using charts as the main means" means that in the highly leveraged foreign exchange gold market, most traders use technical analysis. Think about it, in this highly leveraged market, there are several traders who do not use charts as the main means ?

It is recognized that technical analysis first originated from Dow Theory, which has a history of more than 100 years. Afterwards, Gann Theory, wave concept, moving average, various indicators, etc., have been as numerous as the vast stars; K-line theory, in fact, originated earlier, nearly three centuries.

If technical analysis is invalid, how can it persist and last for a long time?

So how to prove that technical analysis is effective?

It may be easier to explain with an example, just like adolescent boys and girls, you tell them how wonderful things are between men and women, they can't understand anyway, so how can you prove it to them?

The only way is for them to experience it themselves when they become adults. Do they still need to prove it after the experience?

Similar to this, the best way to prove that technical analysis is effective is to see is believing, to test it yourself, the market forms such as: W top-bottom, triple top-bottom, head-shoulders top-bottom, triangle, box shape, etc., and the price evolves in a trend way , K-line shape, horizontal support pressure, etc., these are all facts before our eyes, do we still need to prove it?

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Let me tell you about my own personal experience.

Thinking back to the first two years when I first entered the market, it should be said that trading was based on fundamental analysis at that time, and what I did was paper gold, not margin trading.

At that time, I searched for fundamental news and news every day, and then analyzed and traded.

Once I saw reports from major banks such as JPMorgan Chase, Citigroup, etc., predicting that the future price will go up to 4,000, 5,000, and even 10,000; I thought that with their strength, there should be no mistakes, and the analysis was methodical. , and then bought near the first red arrow 1565, waiting to make a fortune, feeling very happy. ​

However, after a week, the price began to fall, and it was a kind of free fall. I stared at the market, and my mood was like a stone falling from a high altitude. It felt like falling into an abyss. You're trying so hard to grab something, but there's nothing to grab, just keep falling...

In the end, I simply turned off the computer and stopped watching...

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Fortunately, after nearly a week, the price rebounded to around 1485, and then gradually walked out of a circular top. At that time, I didn't understand any technology, and I didn't even know the most basic K-line shape, so I simply and vaguely felt Seeing the physical nature of the price, it was a bit parabolic. After that, I closed my position and backhanded short. I didn’t know what W bottom was. I finally entered the market at the position of the yellow arrow, which was considered to have recovered a large part of my capital.

In fact, I realized the effectiveness of technology subconsciously that time, but I didn't really realize it at the beginning, and then I slowly moved towards the path of pure technical analysis...

Because trading on pure fundamentals is really unreliable for our small retail investors.

As you mentioned, another big guy said that it is reliable to follow the entry time and price of the institution to trade. The question is, as a small retail investor, how can you know the entry time and price of the institution? Only through technology, because no matter how the institutions cover up and hide, their funds will inevitably leave traces on the K-line if they want to enter the market, so technical analysis is the method that is really suitable for our small traders, because the market is important for every trader All are fair.

In fact, there is no need to worry about how to prove the effectiveness of the technology, because it is too obvious. Instead, you should think about how to build a stable trading system with positive expectations. If you really have no idea, you can take a look at my The articles in the "discussion" are almost systematic content, combining "potential, position, and state" to build a reliable system, I hope it will be helpful to you.

Technical analysis I personally think is effective.

Our common support, resistance, trend band identification, trend line, moving average and other related indicators. Isn't this all technical? Another example is the famous Dow Theory, Wave Theory, are these invalid and useless?

That said, it might be a bit extreme. But I think that just because 90% or more traders lose money, it does not mean that the technical aspects are invalid.

As the landlord said, "We should follow the entry time and price of trading institutions to operate to be reliable." Well, there are also difficulties in this path. How do we know when trading institutions enter and exit the market in the first place? How do we know the psychological entry price and expected price of trading institutions, and what is their basis?

Perhaps some traders will say, follow along and do a good job, you don't need to know so much. I do not agree with this point of view. When entering the market, there is no reliable basis and belief in mind, and when holding positions, it is also impossible to let profits run. I believe that the process of holding positions under such circumstances must be frightening, and you will not even sleep well.

For example, the figure below shows the rise of the euro in 2017. Regardless of technical and fundamental aspects, the euro is expected to rise.

From a technical point of view, the shock bottoming trend from January to the middle and late April has paved the way for the rise.

From a fundamental point of view, the monetary policy of the European Central Bank has shifted and the degree of economic recovery has surpassed that of the United States. The euro has become a major "winner" in the foreign exchange market in 2017.

Therefore, I personally think that regardless of technical or fundamental aspects, transactions must have their own direction and point of view. Even if it is wrong, it must be wrong with reason. At the same time, there are also common problems in transactions. In such a huge market, since retail traders cannot predict the future, instead of struggling to seek the ability to predict, it is better to pay attention to the current trend and treat it objectively.

Personal point of view, please advise. Don't spray if you don't like it.

Haha, thank you for the invitation. As for your question, how to prove it? To be honest, it is really hard to prove it. It doesn’t mean that it is effective if the result is profitable, and it doesn’t mean that it is invalid if it loses money. The key is to see what is the logic of this technical school? The logic in the transaction will be much more effective than the outcome of the transaction.

There are two people mentioned in the question, the former and the latter, the former is a trader, the latter is an analyst, the latter can say that logic, it can only show that the latter has no technology at all, because the latter has two possibilities , one is that they may have participated in it, but it was just a try, and they never participated with their heart, so they said that kind of logic because they lost money; The stock market is based on the face of the dealer or big money, and stockholders are also used to this form. If it was me who met the latter, there would be no defense value except to laugh, because he is simply an outsider in the transaction!

The technical school is definitely effective. None of the current masters use methods other than technology, such as news and fundamentals, to make orders. How to prove it depends on how high the success rate of your technical system's judgment system and signal system is. As long as it is effective and the accuracy is greater than 40%, it can be counted as effective. Note: Effectiveness also has to match the profit-loss ratio.

Technical analysis is effective, everything is regular

What both of them said is correct, there is nothing wrong with it, but if they both understand, wouldn't the winning rate be higher?

Boss 1 is definitely an all-powerful man who has experienced many battles, but the difference is that he is not structured enough and stubborn and narrow-minded. Sooner or later because of self-confidence suffer.

Big brother 2, full of vicissitudes and vicissitudes, is indifferent, and relies on his father for food, has no great prospects, and life is limited.

Seeing the essence through the phenomenon and clarifying the principle of technical analysis can prove whether "a certain technical analysis" is effective.

For example,

1. Prove that grid transactions are valid.

1 It is impossible for the price to fall into a negative number, and the lowest value is 0. Unless this mark disappears.

2 As long as someone trades, it will cause a price change.

So grid trading works.

2. After the funds flow in, follow the direction of the funds. -efficient.

Everyone enters the market to make money. So this time after the funds come in, he will push in the direction of the funds to make a profit.

After the funds enter the market, he will shake the position (someone will make a profit to close the position, and shake off some "short-term" positions), then continue to promote, and then exit the market.

The focus of this method is to judge whether there is capital inflow, and after the promotion is the end of the market.

This technical analysis works.

people are really weird

When you have made money by trend for several years,

I started to look down on the system that relies on winning percentage to make money.

When you have made money for several years by pure technology,

I feel like it's basically a lie.

When I watch naked K and make a few years of money,

I think the indicators are all fake.

However, there is more than one way to make money.

If others can make money, there are other strategies.

All roads lead to Rome,

You don't have to follow the crowd,

Monkeys also need to find suitable weapons,

Sometimes bigger, sometimes smaller.

But, I found my own way,

It doesn't mean "don't read, don't listen, don't understand" others.

There is no absolute right and wrong,

But everyone has cognitive biases,

There is nothing wrong with long and short,

Afraid of losing money when you do the right thing,

I am afraid that you will make money when you do something wrong.

The market will change,

After all, just because it suits you now doesn’t mean it will suit you later.

What remains unchanged is that you are always devout to the trading market

To be sure, neither of these two bigwigs made any money in the field of foreign exchange trading. The result of speculation is everything. If you make money, your system is effective. If you always lose money, your system is invalid. The technology tycoon and the probability tycoon each posted their trading results, isn't everything clear at a glance? Still need to argue?

​I agree with what the second big guy said. Forex trading is a capital game , especially for foreign exchange trading played by retail investors like us. As a person, then this person has been losing money, because foreign exchange trading is not even a "zero-sum game", it is essentially a "negative-sum game", which is used by the capital market to transfer risks and draw blood For the vast majority of foreign exchange trading participants, no matter what you rely on to trade, whether it is technical analysis, fundamental analysis or gossip, no matter what you do, you are doomed to lose money.

I also agree with the second sentence. Forex trading is not a natural economy . What is a natural economy? There is input, output, profit return rate, and fixed objective laws to follow. It is impossible to have any fixed law of causality in foreign exchange speculative trading. Whether your principal is large or small, whether you work hard or diligently, has nothing to do with your final Whether it is profitable or not has nothing to do with it. In the natural economy, even if you fail a hundred times, as long as you win once, you are a winner. In foreign exchange trading, even if you win a hundred times, as long as you fail once, you are completely finished.

But on the whole, I don't agree with the second big brother's point of view at all. ​​It is true that only 10% of the people in the market It is true that foreign exchange trading is a capital game, but no individual or organization has enough capital to fight against a country's currency exchange rate, and neither can Soros. Back then, Soros took advantage of the financial crisis to short the currencies and securities of Southeast Asian countries, and finally fell in Hong Kong. That situation was already a financial war, and our small retail investors would become cannon fodder no matter which side they joined. Most importantly, even if a large institution has enough funds to shake a country's exchange rate, as a small foreign exchange retail investor, how can you know where his entry point and entry time are?

We small retail investors do foreign exchange speculative transactions. If we do not rely on technical analysis, what else can we rely on? ​If Honma Munehisa created the candle chart in the late Edo period, the chart analysis of the securities market has a history of more than 200 years. If you count from the time when the Dow Jones Theory was published, the history of Western technical analysis has exceeded 100 years. century. For any trading market, the only public information that is timely, unhidden, and ineffective is the transaction price of commodities. This is the most authentic and reliable trading basis that ordinary trading retail investors can obtain, and all technical analysis methods , are all obtained by relying on real-time updated commodity transaction prices, and it is also the most direct analysis tool for all traders, including masters and Xiaosan, in the past two hundred years.

The biggest misunderstanding of technical analysis is to regard technical analysis as causality. ​​​​Technical analysis is not the law of causality because of something. It can only be regarded as the probability statistics of a price combination phenomenon to explain how the subsequent market may develop when the price market occurs. For example, in the past time, the price has pulled back to the support position of the moving average, and it will rebound eight out of ten times. Then we can use this moving average as an entry point to go long, and the rest is to wait for this phenomenon to return. Show up and get in. But even if eight out of ten times in the past have rebounded, maybe this time you placed an order, it will be the two times that did not rebound, but you cannot say that this technical analysis method has failed. Only when the winning rate of a certain technical analysis method is reduced to a certain extent can it be said that it has really failed. ​The reason why those who use EA will always be liquidated in the end is that it is impossible for any EA to detect the failure of the technical signal. It mechanically executes according to the failed signal, and finally loses everything completely.

​The second misunderstanding of The transaction price of the market is inherent and cannot be changed. All technical analysis methods are derived from the transaction price, which is the result of mathematical processing of the transaction price. When many people use the wrong indicators, they cannot understand why the follow-up price is contrary to what the indicators indicate, because they do not understand the sequence relationship between prices and technical indicators. ​For example, KDJ, after the golden cross, it can be golden again, continue to be golden fork, continue to be golden fork, and the price will continue to fall. At this time, we say that the indicator has "passivated", but in fact it is because the transaction price has gone out of the indicator calculation formula In this case, the technical indicators have expired and have no reference value. When any technical analysis fails, it will be "passivated". This is also the meaning of the existence of traders. You must discover appropriate technical analysis methods in the new market as soon as possible.

Most people are not suitable for trading

Automated trading usually does not refer to the fundamentals, but it can also make long-term profits, and the technology is proven to be effective

The effectiveness of technical analysis has been proven by many trading masters, there is no need to prove it, just like 1+1=2, is there still a need to prove it? Another question? Do large institutions look at the fundamentals and do technical analysis? You must know that large institutions are the most powerful players in the capital market. They are all giants armed to the teeth. Research on fundamentals and technical analysis are all team operations, and they can even manipulate the market at a specific time and under special conditions. Therefore, large institutions are very powerful in terms of fundamental research and technical analysis capabilities, but don’t be superstitious, because there are also many shipwreck accidents in institutions, such as Soros attacking Hong Kong, Wall Street tycoons shorting RMB, etc., and even capital giants like Goldman Sachs , There are also capsizes from time to time.

By the way, the negative oil price of crude oil futures is a typical vicious manipulation event. Seeing that the pigs in the pigsty are big and fat, the exchange temporarily changed the rules, adjusted the minimum oil price to negative, and killed all the pigs in the pigsty! In addition to casino owners, participants may also include the government, oil companies, and large organizations. This is a hunt of the century, and the rewards are very fruitful. This is the worst and most shameless manipulation incident in the capital market in recent years, and it is also the biggest scandal in the capital market. Its effect is equivalent to not only robbing you of your gambling money, but also robbing your other properties, but this matter has been discussed , and found a lot of ridiculous reasons, especially for a certain treasure who was slaughtered so badly and finally downplayed it. Such manipulations are blatant robberies, just like casino owners changing the rules at any time and gamblers gambling. This is the most terrifying existence in the capital market.

How to prove whether technical analysis is effective or not? Ask those big names on the list who make orders based on what method they make orders. Only effective methods will be used by many people.

There is nothing wrong with trading with big institutions, but what method do you use to follow big institutions? People will not tell you where he has what list. In short, I am a purely technical school, and I will use technology to determine what kind of orders large institutions have and where they are.

Technical analysis is premised, read the book, there are 3 major assumptions.

Under the condition that the prerequisite is met, technical analysis can be used.

So does the real world meet the prerequisites?

The market is really a capital game! What has to be changed.

Believe it or not, each method of operation has its limitations, and there are times when it makes money and loses money. It depends on how the individual thinks about this result.

Investors who are unwilling to work hard on the technical aspects can improve their operational capabilities through the fundamentals. Even if it is easier to understand a few words about the fundamentals than the technical aspects, it may take some effort to think clearly.

It’s not that it’s impossible to do it technically, it’s just that the signal is not grasped well. When the technical signal lags behind, the fundamentals will appear to be very advantageous. Of course, the fundamentals will also lag behind. It depends on how individuals grasp it.

There is no absolute way to make money in this market, and you are an expert in any method.

I no longer look at indicators, but I still focus on technical analysis. Technical analysis is the analysis of market behavior, which is feasible from theory to practice.

Game, the same thing, different people look at it differently. According to the law of large numbers, the probability of flipping a coin is 50%. If you look at the fundamentals, the trend is nothing more than rising, falling, and turbulent. Shock also includes rising and falling. with sub-level shocks. Everyone's system and views are different. The 80/20 law is so vividly reflected in the market, the more you pay, the worse it may be.

How to prove this? You just need to be able to ensure that the daily income of your account is positive. But if it grows steadily and normally, then it is guaranteed that your technology is feasible. If you want to determine whether your technology is feasible, it is unrealistic for you to spend real money on a real offer. After all, you can't have a good grasp of your technology and be able to guarantee stability. So since stability cannot be guaranteed, it will affect your trading mentality. So you'd better use a simulated trading or a review tool to review the market, one year or a few months of the market, to see if your simulated trading can be successful and whether you can achieve the expected profit, then your technology is feasible . There are many methods of technology, killing pigs and butts, each has its own method of killing. Some people can do a good deal just by looking at the K-line, some use the moving average, Bollinger Bands, channel lines, etc., and some use the wave theory. Dow Theory. Entanglement theory, interval breakthrough method. Wait, or rely on oscillators, kDJ indicators, MACd indicators. Anyway, if you can guarantee that you will make a lot of money and lose a lot of money, then these analytical techniques are useful. First of all, you must ensure that your methods and technical analysis can achieve a small loss and a big profit. I use, um, the method of space measurement, and I adopt the method of swing trading. As long as it can achieve stable profits, it is a good analysis technique! I never read the news. Regardless of whether he is non-agricultural or what the news is announced. Generally, stop loss and take profit are strictly set. As long as the market is not a big gap. Then there is little imagination of loss. Because you know the swing, making a profit once can be enough for you to lose many stop loss orders. So, who is at greater risk?

Reasoning from a logical level, if your analysis techniques are related to the nature of the market, and logical reasoning can be intertwined, then your technical analysis must be effective and can be certified in the market.

But now most of the theories, the underlying principles are not smooth. For example, if you use an analysis method, you can give this method a famous name, and then explain everything you define yourself, from the beginning to the end. It has nothing to do with the nature of the market, so the results can be imagined