60 votes

Paradox - When to buy & when to sell a share?

It's worth noting that Warren Buffett is a value investor, not a trader. As such, it doesn't tell you much about technical analysis or trend following. Instead, he's implying that when the market gets ...
  • 4,810
55 votes
Accepted

In what way does technical analysis involve astrology and reading tea leaves?

It doesn't literally involve astrology or tea leaf reading... While some people swear by it, technical analysis is often derided as pseudoscience, similar to astrology or tea leaf reading. As it's ...
  • 4,810
48 votes

S&P 500 Prediction

The S&P 500 goes up most of the time. So just assume it always goes up. You will be right most of the time. This is the basis of most investment advice: diversify to match the market rather ...
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48 votes
Accepted

Is it true that, "just ten trading days represent 63 per cent of the returns of the past 50 years"?

Mild vs. Wild Randomness: Focusing on those Risks that Matter and A focus on the exceptions that prove the rule are copies of the original article referenced by the Wikipedia page. The authors are ...
44 votes

Is this the proof that Technical Analysis does not work?

No, your anecdotal experience is not proof that a concept is flawed. There are many many many many many flaws with TA, but proving something takes a lot more than one person's casual attempts. If I ...
  • 48.6k
35 votes

Is it true that, "just ten trading days represent 63 per cent of the returns of the past 50 years"?

Nassim Taleb is remarkably brilliant. It's his work that's cited in the article. In my opinion, there are 2 choices, a misquote, if the article is wrong, or a misunderstanding on the part of the ...
18 votes

Is it true that, "just ten trading days represent 63 per cent of the returns of the past 50 years"?

Since the book was written in 1997, the relevant period would be roughly 1947-1996. Yahoo Finance data starts from 1950, so I will look at "last 47 years" instead. Presumably, the finding by ...
  • 3,649
17 votes

In what way does technical analysis involve astrology and reading tea leaves?

It's an analogy. In general, many hold the belief that the typical traders (read: not Warren Buffett levels of money where the simple act of trading can change the market) cannot beat the market in ...
  • 1,289
16 votes

Is there a candlestick pattern that guarantees any kind of future profit?

I would go even farther than Victor's answer. There is little evidence that candlestick patterns and technical analysis in general have any predictive power. Even if they did in the past, of which ...
  • 6,550
16 votes

Is it true that, "just ten trading days represent 63 per cent of the returns of the past 50 years"?

Let’s simplify it, our example investment is very boring except for one day when it goes crazy. Two investors with same $1,000 initial investment, the market doubles every 7 years except for one day ...
15 votes

S&P 500 Prediction

My high school economics teacher mentioned that when she worked on Wall Street, she and her coworker would make daily bets on market performance. Her coworker would use a bunch of market data, and she ...
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14 votes

Is this the proof that Technical Analysis does not work?

There are firms and people doing exactly that: WSJ article Part of my masters thesis was using candle stick analysis and genetic algorithms, but my conclusion is that it is not really possible. The ...
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13 votes
Accepted

Paradox - When to buy & when to sell a share?

I believe you are confused by the vague language. Trading is a process where smart money and institutions take money from the public. Consider the concept of "market cycle". Institutions ...
11 votes
Accepted

Does Technical Analysis work or is it just a pointless attempt to "time the market"?

Technical Analysis in general is something to be cognizant of, I don't use a majority of studies and consider them a waste of time. I also use quantitative analysis more so than technical analysis, ...
  • 20.1k
11 votes

Is it true that, "just ten trading days represent 63 per cent of the returns of the past 50 years"?

I can't speak to the research methods used in that study but Taleb was likely trying to build on his "black swan" hypothesis by showing that the "black swan" trading days have the biggest impact on ...
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11 votes

Why do value investors ignore technical analysis?

Why do value investors ignore technical analysis? Technical analysis tries to predict future behavior from past behavior purely by looking at prices (and possibly other stats like volume traded). ...
  • 117k
10 votes

Is this the proof that Technical Analysis does not work?

Technical analysis is, by its nature, something that evaluates the past. Making money in stocks requires evaluating the future. If there was a foolproof way to evaluate the future by measuring ...
  • 20.8k
10 votes
Accepted

What kind of activity do the long candle-lines on candlestick charts correspond to?

The "fat" part of the candlestick represents the beginning and ending prices. If the end price is higher than the beginning price the stick will be colored green. If the end price is below the ...
  • 117k
10 votes

S&P 500 Prediction

There is no way to accurately predict the movement direction or severety of the stock market or any market index over any time period.
  • 48.6k
10 votes
Accepted

Can fundamental analysis be applied to market indexes as if they were single stocks/bonds?

In theory it is possible, but very impractical. So much so that it approaches the impossible. Also this does not make much sense. Assuming that it takes 100 hours to do proper fundamental analysis ...
  • 75k
10 votes

Support for 50 & 100 Moving Averages

Who is controlling the 50-days & 100-days chart to follow this pattern? Are they Fund Managers from various investment firms? No one "controls" these patterns - they are just reflective ...
  • 117k
9 votes
Accepted

Chart analysis: What does this mean: 200 period moving average?

200 period moving average means the average over the last 200 units the chart is in. So if you are looking at a weekly chart the period is weeks, if you are looking at a daily chart the period is ...
  • 20.8k
8 votes
Accepted

Is technical analysis based on some underlying factors in the market or do they work simply because other people use them?

Technical analysis is based more on psychology than anything else. As an example, if an analyst estimates or believes that a stock is undervalued, or simply wants to re-balance their portfolio, then ...
  • 8,544
7 votes

Does Technical Analysis work or is it just a pointless attempt to "time the market"?

The study of technical analysis is generally used (sometimes successfully) to time the markets. There are many aspects to technical analysis, but the simplest form is to look for uptrends and ...
  • 20.8k
7 votes

How is the Efficient Frontier drawn?

The efficient frontier is drawn from the risk-returns of various combinations of portfolio assets. The general theory is described here: Theoretical Basis Calculating the average return of a basket ...
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7 votes
Accepted

What do SUPPORT, RESISTANCE and STOP LOSS mean?

When talking about stocks, we sometimes like to pretend that the prices are completely rational and entirely related to the intrinsic value of the stock. The fact of the matter is that this is not ...
  • 5,290
7 votes

Stock market: how to anticipate effect of volume on price

There is no correlation between volume and price. There can be a ton of volume on a day when the price moves a lot, or there can be a ton of volume when the price barely budges. Volume doesn't imply ...
7 votes

In what way does technical analysis involve astrology and reading tea leaves?

I think that your source of information is conflating different things. Tea reading is one of dozens of methods of fortune telling. If you believe that the market can be predicted from any of these, ...
  • 74.1k
6 votes

What are some simple techniques used for Timing the Stock Market over the long term?

"Buy low, sell high" - the problem, of course, finding a crystal ball that will tell you when the highs and lows are going to happen :-) You could, for instance, save your money in cash and wait for ...
  • 11.1k
6 votes
Accepted

Does technical analysis work on small stock exchanges?

Assuming that you accept the premise that technical analysis is legitimate and useful, it makes sense that it might not work for a small market, or at the very least that it wouldn't be the same for a ...

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