if this were the case, it seems likely that others with deeper pockets than you, perhaps other high frequency traders, would rapidly exhaust those profit opportunities
Having said that, “let’s take difference to EMA” is pretty the one-size-fits-all solution, and there are no shortage of firms looking at minute to hour long trades to gobble up anything human TA practitioners would ever try to trade.
This just further emphasizes the point that retail investors relying on TA are having their lunch eaten. HFTs are picking the minute opportunities because that's all that exists. If there were longer-term strategies that were reliably profitable, do you think they simply ignore them?
> If there were long term strategies that were reliably profitable, do you think they would simply ignore them?
Yes? Mid frequency trading (say holding period of 5 minutes to ~1 hour) is a totally different class of quantitative trading, from the features you use to how you build portfolios (if at all) to how you execute on forecasts. At least one top-of-the-game hft firm (that already relied on forecasts instead of speed) got burned on their first attempt to enter mid frequency.
Put differently: "A bunch of smart people who have proven to be able to reliably extract profits from microsecond trades tried their hand at exploiting patterns on longer timescales and were unable to. Even though I have less money, information, access to markets, and am just one person, I believe I can succeed where they failed."
Now, perhaps each new generation of patterns would have diminishing returns over the previous generation. My intuition is that this almost certainly true. But either an argument or evidence has to exist for it and I'm not aware of any.
correct, exactly what I'm saying, any opportunities, including those derived from other opportunities being seized, would themselves be seized by such deep pockets and HFT firms
> ...or day-traders.
unfortunately I doubt it, due to the above
If those with deeper pockets had reliably exploitable trading strategies, other teams with equally deep pockets would be exploiting them. You need to simultaneously believe that widely known and understood patterns exist which are profitable to exploit but also that nobody with large sums of money and a financial incentive to profit is interested in taking that easy money.
But if you assume enough rich people do technical analysis and pattern day trading you can earn money by doing what's essentially technical analysis, but with different patterns - ones designed to capitalize on the old patterns used by the rich.
Keep in mind, I'm not saying technical analysis works. I don't think it does, but that's without seriously examining the evidence. I'm just saying that the diminishing profit argument doesn't work. At least not as presented.