The young economist looks down and sees a $20 bill on the street and says, “Hey, look a twenty-dollar bill!”
Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”
I don't remember too much from my finance courses in business school but one comment from the professor always stayed with me. He said that if there was any succesful pattern to trading, there are firms on wall street which can afford many orders of magnitude more brain power and compute power than you, so they will zero in on it pretty quick if it works. As soon as they do, it doesn't work anymore. Proof: Otherwise they would all be making infinite profit.
Makes sense. This means any trading algorithm that can be programmed is pretty much obsolete (if it ever was any good) by the time it's working.
But such algorithms only work as long as they're kept secret. As soon as the algorithm is made public, every large institution will incorporate them into their trading robots, meaning the information will become priced in to the market value instantly.
There are really only five ways to beat the market:
1) Insider information. (Illegal) 2) Extensive market research, where you understand the companies better than the market does. (Requires A LOT of work) 3) Direct contribution to the company's success (you need to have the talent of a Elon Musk, Mark Zuckerberg or Bill Gates). 4) Mathematical/computational superiority (you need to be at the level of Jim Simons or have the capital to hire such people) 5) Luck.
Mainstream technical analysis is not on the list.
That being said, I'm sure the current AI revolution is leaving some doors open to massive profits to some clever person able to create a model that predicts patterns better than most other algo trading robots.
1.) You don’t get it.
2.) Let me explain.
3.) Science and maths.
4.) I’m no expert I believe in 3 though.
5.) Nothing is 100% accurate.
6.) Full Deepak Chopra.
But it’s hard to do that when something disproves its own validity so utterly.
If someone has a strategy to predict any amount of value from the market, it would be automated immediately (we’re mostly programmers here so that part’s kind of our bag), and so doing abstract that value away to a machine housed at JP Morgan or Citigroup.
tldr; It’s astrology for finance bros.
At least the crypto hype has died down again for another while. They perfected the above during Covid.
While actual finance people use algo trading all the time (meaning technical analysis using secret algorithms), naîve technical analysis is mostly a sales or influencing tool. (Unless the "finance bro" is truely deluded)
The same goes for tech managers. While some actually create agile teams using big data to create useful AI, plenty more just use the terms to inflate their own careers.