(Replying to PARENT post)

People who trade on technical indicators like the author have to consider the market to not be accurately represented by brownian motion.

For technical analysis to be anything other than an abstract form of gambling, the efficient market hypothesis has to be flat out false.

Representing the market using brownian motion only applies in cases where the market is under the weak or strong forms of EMH.

๐Ÿ‘คbsamuels๐Ÿ•‘5y๐Ÿ”ผ0๐Ÿ—จ๏ธ0

(Replying to PARENT post)

It's well known that returns are both not normally distributed (obviously) and not even log-normally distributed (slightly less obvious, but still readily apparent). Moreover, it's pretty obvious that while markets don't conform to any form of EMH, they often trend towards efficiency over time.

This is easy to see in the massive consolidation in the market making space in traditional finance over the last decade and also you can watch it in real-time right now in the crypto space. Even two years ago, it was pretty trivial to be successful as a market maker using quite naive models and a system glued together in Python in a couple days. Today, things have gotten significantly more competitive: many single man operations have become uncompetitive and even larger (3-10 man) and more sophisticated firms are feeling the heat from behemoths like Susquehanna, Jane St, and Jump Trading.

It's amazing how you can feel the crypto market getting more efficient in front or your eyes. It's like running on a treadmill, and you're always terrified it will start going faster than you and your team can run.

๐Ÿ‘คsmabie๐Ÿ•‘5y๐Ÿ”ผ0๐Ÿ—จ๏ธ0

(Replying to PARENT post)

Contrary to popular belief, many growth stocks begin their periods of greatest growth at a time when they have reached an all-time high . This was true of TSLA in April, 2013 and NVDA in April, 2016 (No claim on the significance of April is implied) This observation, along with other technical AND fundamental screening techniques may at least be used to generate a short-list of candidated securities deemed more likely to succeed as investments than others. Yet, none of this negates the responsibility to follow sound portfolio management practices.

(Inventing involves significant risks. You could lose all of your capital. Nothing I've writtend should be construed as investment advice)

๐Ÿ‘คezekiel68๐Ÿ•‘5y๐Ÿ”ผ0๐Ÿ—จ๏ธ0

(Replying to PARENT post)

People who strongly believe in EMH are usually theorists. There are way too many people who's practical track record is way too good to be attributed to chance. I believe markets are random most of the time, but there are moments when they are not. That's where the best traders place their bets.

Also, here's my favorite counter argument to EMH - https://securityboulevard.com/2020/04/investors-buy-up-the-w...

๐Ÿ‘คdeandree๐Ÿ•‘5y๐Ÿ”ผ0๐Ÿ—จ๏ธ0

(Replying to PARENT post)

Surely even the most ardent EMH opponent would at least agree that information is relevant, even if it hasn't been fully absorbed by the market yet, right? I've never met any proponent of technical analysis who maintains that they can divine patterns purely from the shape of the candles, without knowing what they're trading or what day it is?

That flies right past EMH and into the realm of pure numerology.

๐Ÿ‘คapetresc๐Ÿ•‘5y๐Ÿ”ผ0๐Ÿ—จ๏ธ0

(Replying to PARENT post)

>For technical analysis to be anything other than an abstract form of gambling, the efficient market hypothesis has to be flat out false.

Technical analysis is predicated upon the assumption that the efficient market hypothesis is true, and that all investor sentiment and other relevant information is all already priced in.

Whether TA is actually valid or if it's just drawing random foofy lines on a chart remains up for debate.

๐Ÿ‘คna85๐Ÿ•‘5y๐Ÿ”ผ0๐Ÿ—จ๏ธ0