The subject is like the opening of the Pandora’s Box and stirring the hornet’s nest in the world of investment that is highly polarised with antagonists and protagonists of the technical analysis.

I personally find it very important because I am reasonably aware of the gap that exists in the way a professional institution conducts its affairs in stock markets and the flank opened, vulnerable & exasperated retail traders conducts the same.

Investment strategies on long or short term is not a roulette game in a casino to gamble on one's whims & fancies, but is an informed decision that are extremely scientific.

I have heard a few educated morons say that it is brainless job.

Certainly, it is not for those who are unwilling to invest time and resources to understand it. They are advised to look at other options like savings bank, fixed income or better curse their ancestors who was not a born billionaire and therefore the mess.

First, the vast majority of the ”wannabe” retail traders & investors are completely unaware how much of a disadvantage they have against other institutionalised market participants, blinded by their aspiration for the riches, the industry advertises the”SURE SHOT” trading systems that will enable one quick and easy profits like eating a pastry served on a plate for free.

Sadly but quite reasonably, the world of retail trading (irrespective of the market in any geography, entails all kind instruments & derivatives) is full of pits and traps, the technical analysis being only one of the minefield that a novice retail traders walks into.

Putting aside all the misleading marketing like, advisories, chartists recommendations on TVs, trading gurus, dubious educators, and outright scams, let’s get back to the basics - though I am a big sceptic for any historical analysis in any tradable instruments & would delve later in this article.

Let us begin with a fundamental question- What is Technical analysis (TA)?

Well, it is a trading tool employed to evaluate securities (or any other instruments that are traded in the market and attempt to forecast their future movement by analyzing their past price movements and in some case volumes.

It heavily focuses on past data for chart patterns and various analytical tools and its underlying assumptions are that price at any given point in time accurately reflects all available information, and therefore represents the true fair value of the traded asset.

These assumptions are based on the idea that the market price always reflects the sum total knowledge of all market participants. It is a fallacy & a booby trap in the days of algorithmic & insider trades!!!

Today, we find a lot of mutated & curated techniques and methodologies that are nothing but statistical tables plotted in graphic form to present an”image” to facilitate traders in their ‘informed” decision process.

The dilemma with novice retail traders is that they use these studies as if; it is some kind of crystal ball & divine Oracle to their pathway to riches.

TA is built on historical and lagging databases, which mean it uses redundant parameters, which in turn produces rigid outdated responses in the dynamics of the markets that responds to news-flow more than on technical. 

TA is an useful tool- BUT we need to understand what it can do and more importantly what it cannot!

If we are serious about trading, be ready to put in a lot of study hours about how the market is set up and how it operates? Then, be ready to do hours of research on the instrument that we are looking to trade in.

So after criticising the existing business models, can we say with convictions that Technical Analytics have outlived their utilities?

Absolutely not and it is very useful in many ways- but is not a best solution to price predictions.

It is relevant in some historical perspectives as a great tool and must be used as an adjunct to a new tool that has not yet hit the fancies of the trading and investor communities.

So what could be those new tools?

Frankly, I have little idea about the future of the money markets- none have. But I have indeed attempted to derive a new model that I am using for some time now that is predictive in a dynamic environment that makes most of the historical data points redundant as is normally understood. Here the historical data is not the yesterday’s closing data or prior period data, but is the last traded live market tick data of any tradable instrument/ stock during the day.

These changes the dynamics of all calculations of Pivot, Resistance and support levels during the day and derived trade data-points and it continues till the last high or low is broken. In such cases, the metrics gets recomputed and a fresh target or exit appears.

It completely eliminates data of yesterday’s trade, except for a few that I have detailed in this article.

It is a pure mathematical and statistical model that uses some key metrics of price movements by per tick to derive at a predictive price of the instrument, be it shares, commodities or currencies or any derivative & exotics, the fundamental principles are tightly bound on dynamic price movements of any of the instruments during the day trading hours.

Tomorrow is another day in stock markets, where yesterday is history and tomorrow never comes.

I have tested & traded only in- Equity/ Derivative Shares, Commodities and Currencies. I can say with a lot of convictions that its accuracies exceed any standard software that are available in the markets and used by almost all analysts, traders and investors invariably landing with a 50 to 60% strike rate, which is as bad as it can get in financial markets. Eliminating the outliers, the strike rate of this module is in excess of 90%.

What we use is a hybrid of old school parameters of technical analysis and use largely Bollinger Band, Fast & Slow Stochastic, Open Interest for historical studies.

Rest of data, as intraday tradable, is generated in a dynamic environment where history is only the last ticking rate at 20 micro seconds. Of course, a live feed of data is a prerequisite from an exchange to compute & generate it through a snap file. The other prerequisite is to have reasonable proficiencies with MS SUITS, including Access and a good feel about any large volume database management.

A few examples of actual trade data and graphs shall be a good pointer to anyone interested in assessing the accuracy of the new metrics and those should be the new paradigm in coming days in stock exchanges. Just wait & watch.

The data table is on the basis of plug in of live exchange data and some real-time graphs, generated on historical past data, of a few scrip are given below.

This should give a smart trader a head start in financial exchanges, provided one learns the same with intent, purpose and a will to do better on daily basis.

THE NIFTY DAILY CHART OF RECENT DATE (AS EXAMPLE)

LARSEN & TOUBRO CHART OF RECENT DATE (AS EXAMPLE)

ADANI PORTS CHART OF RECENT DATE (AS EXAMPLE)

If one reads the table above, where data are captured in live & dynamic mode, a column states “JOCKEY”, it simply means that it is a share that has statistical variations exceeding the benchmark derived rate by 0.15% to 0.25% maximum, given the tight band of principles that price normally moves or the way I have defined & programmed my metrics. This statistical variation is assigned on the basis of BETA factor- more of it, then width for variations.

For a day trader, it would mean that this is an operator driven stock where trading could be managed by insider trades and pure speculation. In such cases, the best course of action is to avoid any trade in such shares for the day and in case, the trade is executed, then try to exit ASAP.

The better way to trade intraday by anyone is to follow the trailing stop loss methods. It may be one’s saviour when a position is taken out and suddenly due to a news flow; it crashes or rises as a complete outlier to the current trend of the market for the day.

One would also note that Pivot values, are calculated in dynamic mode, are far different than the Pivot that any standard program gives. The fallacy should now be clear to most readers due to a day older closing price and a trade tick during the day. They are like chalk and cheese.

One can easily check those by using any standard software where those values are populated versus the values given in the computation sheet for sample shares.

The formula used for basic inputs are universal and anyone can access it over net. However, extended calculations are proprietary in nature and are trade calculations, thus are undisclosed. 

Readers would also note that total columns displayed are only nineteen (19), whereas, the total computational metrics are more than forty eight (>48). An user would need about twenty four calculation metrics in dynamic mode to get a good grip on data points, hence better equipped & informed for profitable trades.

I am not delving in detailing the formula metrics as it is not merited and neither I would share it (they are proprietary). But for the technically and fundamentally inclined, one can read on Investopedia.com to get some understanding of standard terms of the trade.

Short term trade and portfolio investments are not a lottery ticket to overnight wealth, but are an honourable way to make a living by being independent and prosper over a period of time.

It would not move one from Suzuki Swift to a BMW 7 Series overnight, but if discipline in trade by respecting the outcome, meeting financial obligations, (in case of a bad trade) is maintained and honoured, then it certainly is a great way to grow wealth honourably over a period of time.

This business is not for them who prefer a job with– Two Punch and One Lunch incentive. Money market is not for those who believe in fantasies.

It is a market of the Eagles and Sharks, where an indulging aspirant must find a path of a Piranha, where it doesn’t compete with Sharks nor does it end as lunch for the Eagles, but is a smart nibbler who satiates a bit early before the sharks feasts and nibbles away the meat and get away- a little by little several times & EVERYDAY.

Never look for an optimum trade as there is none. There is no price discovery mechanism, which is a luxury that one may have in portfolio management, a subject of an article for a later date.

Steadfast resolve, continuity & grit would make one a successful entrepreneur in money market. For rest- life offers many more alternatives. 

The role of Regulators & Exchanges are increasingly becoming "cloudy" as it is morphing itself in to a "Cozy Club" of FIIs & DIIs alongwith large brokers and investors.

They "game" the markets at the expenses of retail traders and investors. Today, 95% trading volumes are done in day trades and in future & Option segments of the market that is controlled by the Czars & Sharks.

Let me be candid, our Regulators are not like SEC, nor our Exchanges work like NYSE and the institutions like those. Here none, or hardly anyone, have been put behind bar for insider trading or at best were let off after a pat on the wrist.

On top, the Algorithmic / High Frequency(HF) Traders are given one huge leg up by giving them a ticking time of 2 MS versus a Normal Trade of 20 MS, a ten time faster execution window and an ability to read market data at least ten times faster. A normal trader can see bid & ask for next five trades in 20 MS and a HF trader can see ten times more bid and ask for any scrip in that time and is hugely advantaged to take and exit positions in high volume at a minimal cost and all executed by automated machines.

A retail trader and an investor don’t have that luxury & hence is handicapped to start with.

This needs to change & a proposal to split in exchange windows for small and retail trades & a window for DII, FII, HNI and large investors is long overdue, who are killing the market by making small traders and investors lame duck.

In the USA, they had put McKinsey Head- Rajat Gupta- behind bar for insider trading in companies where he was a Board Member. In India, it happens every day virtually and our regulators are just TOOTHLESS WATCHDOG that cannot even bark at the "Cozy Club" members.

As for quick and easy money, yeah cryptocurrencies are there, alongside horse racing & casinos- right now those are the closest thing we can get…the problem is, in all cases, we need a substantial amount of knowledge or a substantial amount of luck, and we always run out of the latter, sooner or later.

Conventional wisdom in money markets serves well the most & for the brash and overconfidence: IT IS A GRAVEYARD FOR HALF HEARTED PASSIVE ATTEMPTS.