Just thought i would add a post of mine from another forum:
Anyway, according to random walk theory and the efficient market hypothesis day to day price movements are random. Therefore making all technical indicators useless as past prices have zero effect over the probablilities of future price movements. Then tech/a people counter that by saying the markets cant be random because they trend and yes, the trend is your friend. Then that gets countered by a demonstration of a random data model with stochastic distrubution, fat tails and other statistical jargon showing clear trends in the random data.
Then in comes mandelbroit with his fractal theories ect but they are in such beginning stages to be un usable for day to day practical purposes.
Now, i figured that the best way to settle this would be to back test each indicator over years and years worth of historical data across many different markets to see if the indicators do have any predictability elements. I then found this book:
Which did all the statistical work for me and it is shown that 6400 technical indicators turned out to be useless.
So how do people make money with tech/a? The answer is that millions of people use tech/a with proper money management. Out of that many people doing it there are bound to be a small percentage of winners from luck and a large amount of losers which would make sense of the often quoted statistic that 90% of traders lose money.
So is it fair to conclude that successful chartists are just luckier than their fellow losing chartists?
My question to you guys is, do you trade yoursleves? Or did you figure the software business is more profitable?