Prove Warren Buffett wrong not by your words but by beating his returns. Fact is 99% traders can’t even beat FD and they say Warren Buffett is Wrong.
Definitely last post.
yes, so no one is arguing that most people fail. If you don’t do the work, do not test, do not verify, do not wait, cannot control emotions, then you fail and most do. Not everything in TA works, no one will give you the key and even things that work will not work universally. You have to work for it, work through failures.
But most people failing does not mean TA does not work. It means they failed. If 1% make more than FD, then i am in that 1% and i make many times what FD gives while keeping risk in control. Its possible. And funny enough, very simple things work which makes you wonder why people fail. But its not easy, cliched as it sounds.
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Yes, I base my trades on technical analysis. It works for me. The instruments that I use are mainly options - so TA has to be combined with a bit of probability to get the right efficiency.
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That is nonsense I am tired of. TA fails not because you lack discipline, you lack patience or you don’t learn from mistakes. TA fails because of Mathematical reasons. No matter how disciplined you are , you still can’t make 2+2=5.
Course and Book Sellers always sell you ‘Psychology’ . This helps them to shift blame on you. Psychology is BS.
TA fails because :
- Prices are unpredictable just like outcome of a coin flip. Patterns of price and coin-flips lack predictive power.
- Stop Loss reduce your Upside Reward and R Multiple. Reward is always proportional to Risk, by reducing risk you reduce your reward.
- Both 1:2 and 2:1 fail because former reduces your Win Rate and latter reduces your Risk-Reward.
- Empirical Evidence also show that 99% traders lose money. And these 99% believe that they will be in 1% some day. Fact is 1% who are profitable make money due to randomness not superior psychology or superior analysis. Also they are not making significant money as per SEBI.
Ofcourse 1 in 99 will make money from TA but he will make much more from Long Term Investing.
…only in a market that is mostly trending upwards over the long-term.
As has been true over the past few decades in India.
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My last post on this thread.
Long term investing need not be compared to TA. People who are successful in TA will automatically be good investors, not the other way around.
India has not seen a tough bear market - so the concept of everything going up is easily sold here. Good traders stand out when the times are bad.
1 out of 100 is still a good number to work with, I guess what zerodha is trying with this forum is to get more people to that 1% category.
45 lakh people trade in India (source )
Being a part of 45000 successful traders is not at all bad.
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Last last post just to help. I cant change your mind, but just clearing out what i meant. Its ok, most people are better off not trading.
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test - need to test over 10 or so years of data to see if pattern works, how well it works, consistency etc. Don’t data mine, come with simple idea based on charts/experience etc and test it in couple of ways. If it works, great else discard idea and try something else.
Without testing its very difficult to make it work, and testing it manually error-free is almost impossible.
After years of struggle, even though i was learning from good source for couple of years, my biggest advancement came after i could test data. Now we still need to have some good market reading to come with ideas so a newbie cannot just start testing i think. -
verify - Need to look at the backtest in multiple ways looking for errors and over optimizations. Ex - test over randomized data - any edge should disappear, verify with small capital in live etc etc
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wait/patience - It can take a few years of work to find something that works. There is lot of noise and garbage info. Even after getting good info, knowledge to skill takes time. So need to wait and keep capital safe until then. Without clear cut proof of edge, we cannot start trading and that is the mistake many make. They get small sample of trades where they make money and start doing excel maths.
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emotions/discipline/risk management. This is basic necessity, but not an edge on its own. We have to apply edge with perfect discipline, take every trade as per backtest. Any improvements can be tested and deployed but dont mess around live - or do so only if you have tested that it helps. test!
Yes, after i was able to test and confirm edge from market data, psych issues mostly went away. Psych issues are real, but also probably very overrated. Maybe more difficult for discretionary traders, i found trading with discretion impossible for me, without testing data systematically.
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UPSC has artificially capped seats while Market has no such barrier. This comparison doesn’t even make any remotest sense.
(I have cleared Prelims 6 times given Mains 6 times and Interview 2 times. Not flexing because I was always: NOT Recommended)
1 out of 100 who is profitable is:
- Minutely Profitable (they lose upto 50% of profits in brokerage which means their overall profits are very less)
- The 1% is not a fixed group. You may be in 1% for 1 year and then fall back to 99% for rest of the decade.
No disrepect to anyone who uses Technical Analysis. I only posted all this to discuss mathematical reasons why Technical Analysis is not profitable vis-a-vis Long Term Investing. The discussion however failed to take discuss Mathematics and digressed to every thing else like emotions , Psychology and UPSC
If you think ‘work’, ‘patience’ or ‘emotional control’ will allow you to beath Maths then you are mistaken.
Everyone agrees that if a stock is at 100 then it is more likely to hit 99 than 103. This makes any TA unprofitable over long run.
Totally disagree. I know 0 about TA. I think I do decent with long term investing.
Long term investing is easy and less rewarding.
Active trading is very very difficult and high rewarding.
99 out of 100 will make money in investing.
99 out of 100 lose in active trading.
I do both. I do slightly better with trading than in investing. But again. I don’t use TA in either.
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This is what I am trying to say from the beginning. We can’t say UPSC won’t work.
Can’t believe I am defending TA people here even though it makes no sense to me. 
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No. There is no “everyone agrees” here. 
There is no universal agreement on this assertion, not even in this topic-thread.
Also, let us not assume active-trading and Technical analysis (TA) are 100% correlated.
AFAIK, in all the reports/warnings about the majority of the active-traders losing money
- The 99% folks who lose money in trading do NOT all follow just TA alone.
- The 1% folks who ended-up making money weren’t purely following TA.
Might as well have said this in the original post then (or even in this latter post). 
Anyways, in case you haven’t already,
and you are still interested in this topic,
do checkout the references 2-3-4-5 in this article on TA that claim there are mixed-results.
(we are bound to find results that justify both the positions, “for” and “against”, on TA
that we are attempting to discuss in this topic-thread)
Direct Links - [2] [3] [4] [5] [5*]
Please do share if you find something insightful or noteworthy in any of those references.
We can have meaningful discussions around those at length then.
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Some people believe Earth is flat. There is no such thing as Universal agreement even on patent facts.
For retail trader active-trading and TA go hand in hand.
What else they follow?
No point in being pedantic.
Wikipedia Mods are known to delete even valid information. They deleted valid criticism of Vaccines and their side effects. That is just one example. Don’t bring Wikipedia, it is not a valid resource. Direct links to papers that is a valid source.
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Interesting discussion!
One thing that comes to my mind reading this thread is that: ‘There are a million ways to skin a cat’
Nothing works for everyone in the same way. Everyone can be right in their own way.
So, the sensible approach is to keep trying different things - identify what works for you - do more of it and less of what doesn’t.
For every Warren Buffett - there is a Jim Simons who will outperform in CAGR returns but underperform in terms of number of years lived. That’s life.
I do short term options trading from my pledged capital invested in index + liquid funds → which helps me generate extra cash to take medium term stock bets → from which I identify long term investments and hold them as long as they appreciate → the returns keep going back to the pledged capital pool and the cycle continues.
All of it is mostly based on TA which according to me is only about pattern recognition and maths. It’s just one component of the vehicle and not the vehicle itself. FA, Quant, Sentiments etc. are other such components.
The overall trading process is what matters. And this approach has helped me remain profitable for the last many years and generate higher returns than the NIFTY TRI index benchmark so far.
Another lesson that I have learned is that there is no such thing as discipline. Discipline is just the disguise of habits which form by following the same process repeatedly until it becomes second nature.
The key then is to have a profitable and systemized process that you enjoy, and you know will not only help you make money but also compound it overall. The key is compounding (reinvesting part / full returns). Because if you are not compounding your returns - you will keep running but not reach anywhere.
Once you have it, you just need to keep following it until it becomes second nature. Doing that repeatedly for long term is what will lead to the J curve compounding effect.
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There is no rule that says 1% have to keep changing or remain constant. Traders who are alert to the changes will adapt with their experience. If a trader loses in a particular year, does all his previous years gains and (potential gains in future) count for nothing? As long as profits exceed losses (and transaction costs), one can pursue any form of trading.
As a trader, one should just focus on whether he is making enough profits or not. Unnecessary thoughts whether he is in this year’s or next year’s 1% group help nobody.
Anyone who can find pattern in the following series will make money using TA.
Series : 7,-5,-4,1,0,-31,19,-3,-5,-4,8
This series denotes returns of a very popular Nifty Fifty stock which has been in downtrend since May.
These are the daily returns of that stock multiplied by 10 (rounded off for convenience).
If you fail to find pattern, then don’t tell me again that TA works.
Those who don’t want to do Maths can PM me to know the name of this stock.
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Really dont find time to post much here these days… But I’ll jot down some…
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Getting consistently profitable Intraday with Directional strategies using TA (or something else) is tough. But I know people who have gotten consistent results doing it.
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Most of my success is with non-directional options (with a hint of direction sometimes), systematically and without much TA. I use stop losses, targets, and roll strikes, the usual…those are important. My holding period is less than 2 days with OS. And yes I am in the 1% of traders.
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There is no need to choose between Long Term investments and Trading. Most non-directional traders (Option Sellers) are heavily invested, and only trade using margin obtained from pledging investments. So returns are addon to LT investing.
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I have some success in directional strategies too, but holding period is between 1-5 days.
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