is day-trading and technical analysis a load of BS?
I'd like to get some more experienced opinion on this.
I was never taught technical analysis as finance major. The only thing I learned is that all three forms of EMH reject it and my Equity Valuation professor compared it to astrology.
I had a couple of friends who day and swing trade and they only do technical analysis. At first, I thought it was close to rocket science; It looked so complicated and too high energy for me. However, I decided if I want to be a well-rounded Finance graduate I should at least be familiar with it, and of course, the idea of making 10% profit in a day is quite lucrative.
I picked up Technical Analysis of the Financial Markets John J Murphy (technical analyst at Merill Lynch) and I watched numerous day and swing trading videos on YouTube.
My conclusion:
These people on YouTube like Tim Sykes are scammers. They all come off as cheesy digital marketers. If you're so "good" (if you can be good in a borderline gambling activity) why would you want to make money off selling courses and YouTube?
Most of these patterns and these technical analysis indicators don't work most of the times. go to Yahoo Finance, look up any volatile chart, and choose whatever TA indicator you wish, you will notice that buy and sell indicators don't work.
Technical signals are actually used in legitimate quantitative strategies. However, they are used in concert with fundamental signals. Alone, they have little if any value.
(Coming from someone who trades their own book / family office):
The main issue with TA, specifically TA indicators, is that they're lagging. ALL indicators need price to move a certain amount or the rate of price change to increase/decrease to receive a reading or trigger. From my knowledge, the best quants are largely focused on price and volume (since price is the only thing that matters in the end right...?). There are of course benefits to having a reading from an indicator that is deeply oversold/overbought but everything is generally secondary from price imo.
One thing I'd note is a lot of the successful funds are position traders, they'll build a position and hold for a few weeks to a few months. Given the market volatility, it's difficult to catch the bottom/tops but easier to position from say region A to region B (of where one would evaluate price to move).
In short, swing trading can be done successfully and any YouTuber or service selling some package is more than likely a scam. PM with additional questions.
Alone, technical indicators are lagging, which is why they are mostly useless on a univariate basis. Combined with fundamental indicators and other data sources, technical indicators have the capacity to augment the forward-looking ability of the model as a whole.
I'll chime in as well.. background in prop trading for a multi strat fund. Technical analysis is important information.
Support and resistance lines mean there is more demand/supply at those price levels...good to know.
More importantly though, is the amount of volume traded. If it's a high volume day to us, that means shareholders view whatever event just happened as significant. That means, depending on what happened, there could be an outsized move in price.
It's one tool in the tool kit , but I echo previous comment that equity prices will likely change based on fundamentals.
Tim Sykes is a fucking tool shed.
Of course it isn’t. Risks needs transferred between parties and that is what a trader does. Whether it is Day trading, swing trading, some kind of hedged longer term arb trade. EMH is imperfect and eve relies on trading to make the theory work. It’s not like on the same day same hour giant fund A wants to sell Apple and giant fund b wants to sell Apple. Traders facilitate this thru a mix of behavior scientists, fundamental, and some form of technical analysis to figure out where they think a long term holder will eventually be interested in buying a security. Big funds are slow moving; while traders might not be perfect analyst they are prepared to act much faster and facilitate risks transfer.
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