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The Heretics of Finance: Conversations with Leading Practitioners of Technical Analysis

Name: The Heretics of Finance: Conversations with Leading Practitioners of Technical Analysis
ISBN: 9781576603161

by Andrew W. Lo, Jasmina Hasanhodzic

January 2009

Beginner

331 pages

7h 2m

English

Wiley

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Copyright
Praise for The Heretics of Finance
Acknowledgments
Introduction
The Death of the Random WalkCultural BiasesAutomating Technical AnalysisWhat Did We Learn from the Interviews?A New BeginningNotes
1. Ralph J. Acampora
1.1. What led to your interest in technical analysis?1.2. Which mistake taught you the most?1.3. Describe your style of technical analysis.1.4. In what kind of market conditions do you make the most mistakes?1.5. How much of what you do are you willing to share with others?1.6. If all patterns/indicators/strategies you use are in the public domain, what is it about the way you use these tools that accounts for your superior success?1.7. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?1.8. Is technical analysis more effective when used on its own or when combined with fundamental analysis?1.9. So your approach is purely technical. You bring in fundamental analysis only when you're explaining your purely technical approach to a nontechnical audience. Correct?1.10. Does political or global analysis influence the decisions you make in your chart room?1.11. Why do you eventually share your inventions with others, rather than keeping the edge for yourself?1.12. How often do you use the technical tools you developed yourself?1.13. Describe your working day.
2. Laszlo Birinyi Jr.
2.1. What led to your interest in technical analysis?2.2. How did you come to focus on technical analysis as a field?2.3. Did someone or something in particular in the field inspire you?2.4. Did you learn the craft by studying the literature on your own, or by studying with a teacher?2.5. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature?2.6. Which mistake taught you the most?2.7. Describe your style of technical analysis.2.8. How do you go about this dissecting of the market?2.9. How much of what you learn from others do you directly apply in your trading?2.10. How do you learn what works for you and what does not, without taking big losses?2.11. In what kind of market conditions do you make the most mistakes?2.12. How much of what you do are you willing to share with others?2.13. If all the patterns/indicators/strategies you use are in the public domain, what is it about the way you use these tools that accounts for your superior returns?2.14. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?2.15. Is technical analysis more effective when used on its own or when combined with fundamental analysis?2.16. What percentage of your analysis is intuitive?2.17. What drives your innovative process?2.18. Were there times when you felt that relying on classical patterns and indicators was simply insufficient, and that developing new technical tools was necessary?2.19. Describe your working day.2.20. To what extent does your trading control your life?
3. Walter Deemer
3.1. What led to your interest in technical analysis?3.2. How is your style of technical analysis distinct?3.3. How much of what you learn from others do you directly apply in your analysis?3.4. Is technical analysis more effective when done working individually or in teams?3.5. Since all the patterns/indicators/strategies you use are in the public domain, what is it about the way you use these tools that accounts for your superior returns?3.6. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?3.7. How much of your technical analysis is intuitive?3.8. What drives your innovative process?3.9. Were there times when you felt that relying on classical patterns and indicators was insufficient, and that developing new technical tools was necessary?3.10. Describe your working day.
4. Paul F. Desmond
4.1. What led to your interest in technical analysis?4.2. Did you learn the craft by studying the literature on your own, or by studying with a teacher?4.3. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature?4.4. How is your style of technical analysis distinct?4.5. Is technical analysis done better working individually or in teams?4.6. Are there certain market conditions that increase the likelihood of your making mistakes?4.7. If all patterns/indicators/strategies that you use are in the public domain, what is it about the way you use these tools that accounts for your success?4.8. Is technical analysis more effective when used on its own or when combined with fundamental analysis?4.9. Were there times when you felt that relying on classical patterns and indicators was insufficient and that developing new technical tools was necessary?4.10. Describe your working day.4.11. To what extent does your work control your life?
5. Gail M. Dudack
5.1. What led to your interest in technical analysis?5.2. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature?5.3. Which mistake taught you the most?5.4. How is your style of technical analysis distinct?5.5. Are there certain market conditions that increase the likelihood of your making mistakes?5.6. If all the patterns/indicators/strategies that you use are in the public domain, what is it about the way you use these tools that accounts for your superior success?5.7. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?5.8. What percentage of your analysis is intuitive?5.9. Why do you share your inventions with others rather than keeping the edge for yourself?5.10. Is it possible for you to completely stop thinking about the market?
6. Robert J. Farrell
6.1. What led to your interest in technical analysis?6.2. Did you learn technical analysis mostly on your own or with a teacher?6.3. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature?6.4. Which mistake has taught you the most?6.5. How is your style of technical analysis distinct?6.6. In what kind of market conditions do you make the most mistakes?6.7. Are all the indicators/strategies you use in the public domain? And if so, what is it about the way you use these tools that accounts for your superior returns?6.8. Is technical analysis more effective used on its own or combined with fundamental analysis?6.9. How much of your technical analysis is intuitive?6.10. What drives your innovative process?6.11. Were there times when you felt that relying on classical patterns and indicators was insufficient, and that developing new technical tools was necessary?6.12. Why have you shared your inventions with others rather than keeping the edge just for yourself?6.13. Is your confidence in the ability of technical analysis to forecast future price moves strong enough to relieve you of stress?

7. Ian McAvity
7.1. What led to your interest in technical analysis?7.2. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in literature?7.3. Which mistake taught you the most?7.4. If all patterns/indicators/strategies that you use are in the public domain, what is it about the way you use these tools that accounts for your superior returns?7.5. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?7.6. How much of your technical analysis is intuitive?7.7. What drives your innovative process?7.8. Were there times when you felt that relying on classical patterns and indicators was insufficient, and that developing new technical tools was necessary?7.9. Why do you share your inventions with others, rather than keeping the edge just for yourself?7.10. Is your confidence in the ability of technical analysis to forecast future price moves strong enough to relieve you of stress?7.11. To what extent does your trading control your life?7.12. Describe your working day.
8. John J. Murphy
8.1. What led to your interest in technical analysis?8.2. Did you learn the craft by studying the literature on your own, or by studying with a teacher?8.3. What were some of the first things you learned when you started working as a technical analyst?8.4. Which mistake taught you the most?8.5. How is your style of technical analysis distinct?8.6. Describe your approach to the practice of technical analysis.8.7. Is your analysis more effective when you're working by yourself or when you're working with others?8.8. In what kind of market conditions do you make the most mistakes?8.9. If all patterns/indicators/strategies you use are in the public domain, what is it about the way you use these tools that accounts for your superior returns?8.10. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?8.11. Is technical analysis more effective when used on its own or when combined with fundamental analysis?8.12. How much of your technical analysis is intuitive?8.13. At this point in your career, would you say that classical technical tools are sufficient?8.14. How soon after you develop a particular technical tool do you make it accessible to the public? Why do you share your inventions with others, rather than keeping the edge just for yourself?8.15. So there are tools that you've developed but never shared with the rest of the world?8.16. Describe your working day.8.17. Is your confidence in the ability of technical analysis to forecast future price moves strong enough to relieve you of stress?8.18. Did the market have a strong hold on your life in the beginning of your career?
9. Robert R. Prechter Jr.
9.1. When did you first get interested in technical analysis?9.2. Did a mentor play a role in your development as a technical analyst?9.3. Did you learn the craft by studying the literature on your own, or by studying with a teacher?9.4. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature?9.5. Which mistake taught you the most?9.6. How is your style of technical analysis distinct?9.7. Is technical analysis better done working individually or in teams?9.8. How much of your approach to analysis are you willing to share with others?9.9. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?9.10. Is technical analysis more effective when applied on its own or when combined with fundamental analysis?9.11. How much of your technical analysis is intuitive?9.12. Some technicians believe that structures such as the Elliott wave, Gann's natural order postulates, Fibonacci numbers, etc., underlie market action. What is your opinion?9.13. Is your confidence in the ability of technical analysis to forecast future price moves strong enough to relieve you of stress?
10. Linda Bradford Raschke
10.1. What led to your interest in technical analysis?10.2. Did you have a mentor?10.3. Was experience your teacher because you could not rely on the information you found in the literature?10.4. How is your style of technical analysis distinct?10.5. How much of what you learn from others do you directly apply in your trading?10.6. Is your analysis more effective when you're working by yourself or when you're working with others?10.7. In what kind of market conditions do you make the most mistakes?10.8. Which mistake has taught you the most?10.9. How much of what you do are you willing to share with others?10.10. If all patterns/indicators/strategies that you use are in the public domain, what is it about the way you use these tools that accounts for your superior returns?10.11. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?10.12. Is technical analysis more effective when used on its own or when combined with fundamental analysis?10.13. What drives your innovative process?10.14. Were there moments when you felt that relying on classical patterns and indicators was simply insufficient, and that developing new technical tools was necessary?10.15. Are there things that you developed but never shared?10.16. Describe your working day.10.17. To what extent does your trading control your life?
11. Alan R. Shaw
11.1. What led to your interest in technical analysis?11.2. How is your style of technical analysis distinct?11.3. Is your approach to technical analysis both art and science?11.4. How much of what you do are you willing to share with others?11.5. If all patterns/indicators/strategies that you use are in the public domain, what is it about the way you use these tools that accounts for your superior success?11.6. When you encounter a classical indicator that's no longer working, do you try to change your interpretation of it, or do you discard it and invent something new?11.7. Describe what your typical working day was like before you retired.
12. Anthony W. Tabell
12.1. What led to your interest in technical analysis?12.2. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature or heard from your father?12.3. Has your practice of technical analysis changed significantly since the death of your father?12.4. How is your style of technical analysis distinct?12.5. Is your analysis more effective when you're working by yourself or when you're working with others?12.6. In what kind of market conditions do you make the most mistakes?12.7. If all patterns/indicators/strategies that you use are in the public domain, what is it about the way you use these tools that accounts for your superior returns?12.8. Is technical analysis more effective when used on its own, or when combined with fundamental or other kinds of analysis?12.9. How much of your technical analysis is intuitive?12.10. Were there times when you felt that relying on classical patterns and indicators was insufficient and that developing new technical tools was necessary?12.11. Is your confidence in the ability of technical analysis to forecast future price moves strong enough to relieve you of stress?
13. Stan Weinstein
13.1. What led to your interest in technical analysis?13.2. Are there things you learned only after you started applying technical analysis to real markets, things you never saw in the literature?13.3. Which mistake taught you the most?13.4. How is your style of technical analysis distinct?13.5. Is technical analysis more effective when practiced individually or in teams?13.6. How do you deal with the problem of the tradeoff between early signal detection and sensitivity to random noise?13.7. Is technical analysis more effective when used on its own or when combined with fundamental analysis?13.8. How much of your technical analysis is intuitive?13.9. What drives your innovative process?13.10. To what extent do you share your inventions with others?13.11. Why do you share your inventions with others rather than keeping the edge just for yourself?13.12. Is your confidence in the ability of technical analysis to forecast future price moves strong enough to relieve you of stress?13.13. Did you always have the balance in your life, or did you have to work at it?
14. Conviction: Countering the Skeptics and the Scoundrels
14.1. Have you always been convinced of the validity of technical analysis? Have you become more or less convinced since you first started?14.2. Did the lack of credit many academics gave to technical analysis during the early days of your career ever discourage you or make you doubt the validity of technical analysis?14.3. Has a big loss ever made you doubt the validity of technical analysis?14.3.1. You doubted the validity of technical analysis?14.4. Have you found that your experience with technical analysis contradicts statements made in books? And has that discouraged you?14.5. Does the absence of hard-and-fast rules or proven theories in technical analysis ever bother you?14.6. Do you believe that technical analysis works even when applied to data other than the market-action data—for example, the weather or river flow data?14.7. What do you believe is the best proof of the validity of technical analysis?
15. The Evolution of Technical Analysis
15.1. How has the craft evolved since you first started this work?15.2. As the field evolves, new indicators and patterns are being introduced. Do you try to stay on top by familiarizing yourself with the new inventions?15.3. To what extent has the introduction of the variety of computer software aided the craft?15.4. To what extent do you rely on computer-generated signals? And what are the advantages and disadvantages of doing so?15.5. Would you recommend that people construct their own charts by hand? And should they do so throughout their careers?
16. Luck, Astrology, and Other Unsanctioned Signs
16.1. What is the role of luck in technical analysis?16.1.1. You've mentioned how certain people go through periods of being tremendously precise [cf. Chapter 17]. How is that possible? Is that luck?16.1.2. So these techniques work very well over certain short periods of time. What exactly makes them fail other times?16.2. Do you think that the inclusion of astrology in technical analysis undermines the credibility of the craft?16.3. Some prominent technicians believe that structures, such as the Elliott wave, Gann's natural order postulates, Fibonacci numbers, etc., are the laws that underlie market action. What is your opinion?16.3.1. Do you believe that these structures underlie the market action, that they are the governing principles?16.3.2. Are you convinced that these theories are the underlying laws of the market?
17. Creativity, Talent, and the Art of the Craft
17.1. What role does creativity play in technical analysis? Can this creativity be learned?17.2. Is there such a thing as a talent for technical analysis? And can you define it?17.2.1. Do people drawn to technical analysis tend to have a more developed analytical side or a stronger creative side?17.3. What personality traits characterize a highly successful trader?17.4. Can the absence of talent or favorable personality traits be compensated by hard work and dedication?17.5. If technical analysis is partly art, then it's subject to many interpretations. Does that validate the idea that "technical analysis is what you want it to be"?17.5.1. What do you mean by guessing?
18. The Challenge of Emotions
18.1. How did you feel when you first lost a lot of money? Did it become easier to lose as you became more experienced?18.2. To what extent, if any, do your emotions interfere with your craft?18.3. Is the ability to separate emotions from the work of technical analysis an inherent trait, or can it be learned?18.3.1. Are there people who just cannot conquer their emotions and reverse their positions when the time comes, no matter how much advance planning they do?
19. The Path to Success
19.1. What kind of formal education is the best preparation for the profession of technical analysis?19.1.1. What do you look for in people when hiring?19.1.2. Does being aggressive and pushy help in this business?19.1.3. Can formal education enhance the creativity required in the practice of technical analysis?19.1.4. Are verbal skills and communication skills important to work on?19.1.5. In terms of formal education, what would be the best subject to major in?19.1.6. You mentioned the importance of a good teacher when you're studying technical analysis. When you were studying, did you have a teacher or a mentor?19.2. Do you believe artificial intelligence will ever be sophisticated enough to replace a human technical analyst?19.3. What advice would you give to students of technical analysis? What is the key to success?
20. Favorite Patterns and Indicators
20.1. Which technical indicators do you consider to be the most and the least reliable?20.1.1. Are the indicative indicators generally more useful than the descriptive ones? Is there a particular indicative indicator that you like to use?20.1.2. Are there indicators that are completely useless both from the descriptive and indicative standpoints?20.1.3. Do you also look at classic continuation and reversal chart patterns, such as, for example, the head-and-shoulders pattern?20.1.4. What do you think of the classic continuation and reversal patterns, such as, for example, the head-and-shoulders pattern?20.2. How do you test patterns or indicators before you start using them with real money? Do you ask for other people's opinion when you're making such decisions?20.2.1. How do you test some of the more readily quantifiable indicators?20.3. Have you encountered patterns or indicators that generally work well but become misleading under certain market conditions?20.3.1. Could you give me an example of a pattern or an indicator that is particularly sensitive to such changes in the environment?20.4. Is the number of indicators you follow greater when the amount of money involved is larger?
References
About the Authors
About Bloomberg

Content preview from The Heretics of Finance: Conversations with Leading Practitioners of Technical Analysis

Chapter 10. Linda Bradford Raschke

Sometimes the best moves happen when nobody can figure out why, so I'm purely interested in basic supply and demand, and in the balance that's there. I don't care why the market is doing what it's doing. I'm a purist. I don't do any fundamentals at all.

Linda Bradford Raschke is president of LBRGroup, a registered commodity trading adviser (CTA) and money-management firm, and president of LBR Asset Management, a commodity pool operator. She began her professional trading career in 1981 as a market maker in equity options. In addition to running LBRGroup's CTA program, she is the principal trader for the Granat Fund.

Raschke was recognized in Jack Schwager's critically acclaimed book The New Market Wizards and is known for her own top selling book, Street Smarts: High Probability Short term Trading Strategies. She has been featured in dozens of financial publications and on financial television and radio programs, and has served on the board of directors for the Market Technicians Association. She is a past president of the American Association of Professional Technical Analysts and currently on its board of directors.

Raschke has presented her research and lectured on trading for many organizations, including the Managed Futures Association, the American Association of Professional Technical Analysts, Bloomberg, the Market Technicians Association, and the International Federation of Technical Analysis, and has lectured in more than sixteen different ...

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The Heretics of Finance: Conversations with Leading Practitioners of Technical Analysis

by Andrew W. Lo, Jasmina Hasanhodzic

Chapter 10. Linda Bradford Raschke

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