Technical Analysis on Trial

Following investment advice from self appointed TA Champions.

Financial markets are considered to be prediction proof machines: the current price of something like Gold, Apple Stock or Bitcoin should reflect the agreed upon present and future value that market participants arrive to by buying and selling with the available information, thus future prices will reflect intrinsic and external events that are unknown, so nobody has a better chance of profiting ( unless there’s inside trading ), and most importantly predicting is a guess about future events.

What if someone told you that they could predict the market with 100% accuracy based solely on their observations of price movements ?

TA ( Technical Analysis ) does precisely that, and listen, I am not here to tell you all of it is snake oil just because I say so, I personally don’t touch the stuff, but I’ve always been curious as to how effective or ineffective it truly is, who knows, I might be wrong.

Thankfully there are tons of TA Gurus out there making daily recommendations based on charts and patterns, so in the interest of doing something more scientific, let’s take a sample and see what happens…

Find 5 self appointed gurus and follow their advice during the first 6 months of the year (Jan 2019 - Jun 2019). Simulate recommended trades, our initial position will be $1,000 and we will give each guru a $200 position to start, to give each guru an equal weight, we’ll divide the $200 in 5 periods and bet on the most popular strategy ( by likes, upvotes etc) that’s closest to that period date which conveniently is the end of month ( when you might get a paycheck and use your guru’s strategy ), short positions carry no interest to further simplify things and we will measure our Profit & Loss ( P/L) at the end of June 2019 unless there’s a specific target and it’s reached.

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