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To: mishedlo who wrote (208898)	12/10/2002 7:56:41 PM
From: robnhood	Respond to of 436258

I think that TA was not nearly followed as much as it is now. Computers and internet have allowed a lot more access to trading as opposed to investing.

To: mishedlo who wrote (208898)	12/10/2002 8:28:06 PM
From: Perspective	Respond to of 436258

<TA works precicely because enough people believe in it and act on it> When I say "it stops working" I mean that it ceases to work for those applying it. I agree that TA has made important turning points that much more important. With everyone looking at an obvious trendline, a push over the trendline causes an immediate surge of mindless demand. Taken to the limit, the first tick over the TL would cause an immediate gap over the line until all TA following buyers are exhausted. If enough people follow it, the gap would eliminate the possibility for anyone using it to make any money. If there were enough smart participants, they would even begin to anticipate all the stop orders sitting at the threshold. They'd front run a breach - buy in anticipation below the breach, driving it through the threshold - then sell to all the triggered market orders activated with stops. Then, if there is enough demand in the stop orders, they'd even sell short into the artificial demand, and cover on what would soon look like a failed attempt to breach the TL. I've adapted my own TA now to account for this phenomenon - I expect TLs and swing highs/lows to be breached, and it's only the behavior on the retest that I pay any attention to. You can see this effect clearly with momentum investing. At its root is a solid theory that worked fine for locating the best growing companies in an environment where few people practiced "buy at the highs" trading. However, when everyone starts doing it and ignoring valuation, the stocks become totally removed from their fundamentals, and the momentum investors all got stuck with fistfulls of worthless stock certificates. EDIT: what's more, if enough people start practicing the reverse psychology, it then fails to operate as well! An efficient market would have the two operating in balance I suppose. BC