The Bezinga team did a nice post, opposing the ideas of technical analysis, and by association, system trading that relies on technical inputs. In the spirit of full disclosure, it would be a worthwhile read.
Personally, I completely disagree with their view, but if you are considering systematic trading, technical analysis, or you are investigating trading systems and want the “rest of the story”, this makes it pretty simple.
The Bezinga team makes the point that just because something happened in the past doesn’t make it likely for the future. Well, that’s true, but what if it happens over and over again. Take for example the 1972 Dolphins. They won every game including the championship that season. Seriously, after winning game after game and then some, would you really bet against them in the next game?
How about this… I live in the Seattle area which is known for it’s wet weather. In spite of our meteorological reputation, the first weekend in August is sunny 92% of the time. Now if I was planning an event in January for the August time frame, it would be far too early for me to have “fundamental” data. I couldn’t see or rely on weather maps… BUT… I COULD rely on the pattern of past years.
Patterns folks! That’s what technical analysis and system trading is all about. Bezinga says that we could put together lots of “random” data and come up with a decent trading system; but we don’t use random data. We use data with repeating patterns, and then correlate them with performance.
Good Trading…
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