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Is it a right "technical analysis method...


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DEAR ALL FORUM MEMBERS..

i got one more article from tips provider..they r saying below

How We Analyse Stocks:

 

The advances in computer Technology have made possible for every individual to Trade in the Markets thereby making the Markets volatile like never before. Unfortunately softwares have not kept pace with this technical revolution. Today we have softwares like Amibroker, Falcon, Metastock, AdvacedGet etc. which plot attractive charts with many colorful indicators. We get lured by these eye-grabbing displays & start making our crucial investment decisions on the basis of these indicators. The bitter truth is that, these indicators no longer work. Indicators & Oscillators like MACD, RSI, SMA,CCI etc. were dedcued around 3-4 decades back & they have already lost their profit significance. According to Efficient Market Hypothesis (EMH), any piece of information that is easily available to everyone cannot be used to make profits in the Market. And for this reasons our traditional Technical Analysis Patterns & Indicators no longer work in todays date.

 

Most of us have thought Technical Analysis is all about a Mechanical system which has performed exceptionally well when back tested on the previous data, hence its very obvious, it will perform the same in the future. This is the biggest notion in the field of Technical Analysis & it’s wrong. Market never repeats itself. Markets do show similar movement like in the past but it is never the same movement. Hence, we have adopted a dynamic approach to analyse a stock which is self-adaptive. We have sucessfully applied technologies of Artificial Intelligence (AI) like Neural Networks, Swarm Technology, Robotic Image Processing etc. & engineering tools like Machine Learning, Data-Mining, Digital Signal Processing (DSP) etc. to perform very highly accurate analysis of the stocks & produce extremely precise predictions.

 

After joining Expert Analysis, you put a lot of faith in us regarding your trading decisions, hence it is very important for us to be transparent with our clients in what we do to perform our analysis. Here is a very brief outline of the methods employed by us in performing Technical analysis. Please note: The Analytical Strategies mentioned here is carried out by highly qualified professionals with Expert Analysis, & doing the same by you may not render you the same results.

 

Performing Technical Analysis on a stock is basically trying to hear what the chart has to say. Our analysis scheme is basically divided in 4 parts:

 

· Identifying the Trend/Phase of the stock using Hurst Cycle Analysis.

 

· Recognizing the strength/Momentum of the trend with Maximum Entropy Spectral Analysis (MESA).

 

· Familiarizing patterns using Hidden Markov Model (HMM) & Support Vector Machine (SVM).

 

· Booking profits at the key reversal points through Wavelet Transformation (WT).

 

Identifying the Trend/Phase of the stock

 

J.M. Hurst, an Aerospace engineer came up with the cyclic thoery for the markets in 1970's. Till today the Cyclic analysis is considered as the mother of all Analytical models. We use Cyclic analysis to find if the stock is in the Trend Mode or the Cycle Mode. At any given point of time, the price of the stock represents the resultant mean of all the different nominal cycles underlying the stock. We use cyclic analysis to reduce the dominant cycle associated with the price & thereby estimate the long term & short term trend of the stock.

 

Recognizing the strength/Momentum of the trend

 

The Maximum Entropy Spetral Analysis (MESA) is an analytical method formulated by geophysicist's in 19th century for miniming operations. This method was adopted by John F Ehlers in his book "Rocket Science for Traders". This method works far better than Fast Fourier Transform (FFT) in dedcuing the momentum of the stock since MESA requires lesser data to analyze & the spectral resolution is very accurate. Once the Stock exits the cycle mode & enters into the trend mode, MESA quickly picks up the spectrum & gives a detail picture of the strength of the trend & gives a before hand information to stay or to exit.

 

Familiarizing patterns

 

Chart patterns are of 2 kinds. One are the Visible patterns & other is hidden patterns. Visible patterns like head & shoulders, triangles etc. only work 50% of the time after breakout. But hidden patterns have huge profit potential.. Hidden patterns are recognized using Machine Learning tools like Hidden Markov Model & Support Vector Machine. These methods take into account every shortcoming of the traditional analysis methods. This Artifical Intelligence (AI) technique has been adopted from Auto-Pilot Technology used in Aircrafts where Pilot's decision making pattern is recognized & imitated in Auto-Pilot mode of the flight. Our Walk-Forward Backtesting has showed a profit accuracy of more than 80% using this model alone.

 

 

 

Booking profits at the key reversal points

 

Wavelet Transformations (WT) are applied to signals/data to obtain further information from them which is not readily visible in the raw signal. In time series data, when we plot time domain signals, we obtain a time-amplitude representation of the signal. Using these amplitude magnitude, we find out the average length of the move & the levels to lock our profits. This method has been adopted from Communitcation enegineering system where WT is used to evaluate the length over which a signal needs to be carried from the transmission point. We also combine some traditional Support & Resistance evaluation methods like Fibonacci& Pivot Point Levels.

 

 

 

Software we use:

 

Amibroker 5.40

 

Sentient Trader Version 3

 

Timing Solution Advanced

 

Matlab R2012A

 

Biocomp Profit 8

 

GNU Octave

 

FlexPro

 

Wolfram Mathematica 8

 

Environments:

 

iPython

 

Dot Net

 

NOSQL

 

R version 2.15.1

..pls i request ur comments for above is good / gimmick words...

 

happy trading...

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And for this reasons our traditional Technical Analysis Patterns & Indicators no longer work in todays date.

 

I find this statement a bit over-board. Ofcourse there is no such thing as a Holy-Grail.... except for using your brains and having a feel for the market. But at the same time, any indicator, even trendlines are effective. Candlesticks work amazingly well if your eye sets in for the different patterns.

 

A lot of fancy words and phrases above. Cannot make a judgement on those analysis methods w/o trying it out myself. Hence very difficult to say what is the validity of the above claims.

 

Which market is that for?? Link to the original website please??

 

EOD...I believe common sense works the best. Learn your few indicators well and understand your market. Stick to basics and good money management. You should come out on top.

 

Best of luck!!

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  • 1 month later...
There is no RIGHT method to anything nor is there a Holy Grail. That is because there are many things you can do to get the same results. Understanding what you are doing and why will get take you a long way. This is because if you do, you will know if it is working; how well it is working; and to keep doing it or go back to the drawing board. This understanding will also keep you from killing your bank account because you will limit your losses quickly because of this understanding. Edited by robbye67
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Guest ankurkanoria
More complicated methods like AI, etc. essentially produce a more curve-fit solution (more on this in Howard Bandy's excellent books). They dont perform as well in out of sample tests over longer periods of time. Simple and smart models should be preferred for consistency. Howver, its very intellectually stimulating to build complicated models and use them, but its really not much fun to use others' models.
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  • 9 months later...

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