Tarun

More on Technical Analysis

What about Black-Scholes? Many an options trader would die without Black-Scholes (even though most of them are too full of themselves to bother understanding the math behind it). Technical Analysis may encompass options trading as well (I am referring to stock options), depending on your definition. Thus, your last sentence ("Meanwhile, the technical-analysis crew seems to think that they're dealing with immutable, permanent, semi-scientific probabilistic laws. In the markets, there's no such thing") is unfounded. The Black-Scholes standard option pricing model mathematically proves the existence of volatility (defined in terms of Ito Calculus as sigma; related to the rate of change of the value of a stock in terms of the Wiener process) and is a quantitative, technical probabilistic law that is mathematically proven (thus it has full logical proofs written that are existential-universal and relies on NO empirical evidence). Granted, Black-Scholes in the real world is often misused because traders simply don't understand the limitations of the model (the 7 assumptions: 1. Either no dividend or continuous dividends 2. Continuous trade of the underlying security 3. no taxes/costs for transactions 4. No Arbitrage 5. Short Selling is possible 6. Fractional securities 7. Risk-Free/0% Interest). However, that doesn't mean that ALL technical analysis doesn't have a solid logical foundation.