Yesterday, I talked to a friend and heard him say that he was looking at K-lines and favorable news for trading.

For the idea of investment, he should be clearer than most of the retail investors, why would you look at the K-line? Is this really useful?

Because I wrote an article a while back that explored why momentum strategies work, and concluded that

Momentum strategies work because the triggers that lead to price changes are overreacted to by irrational investors.

His behavior piqued my interest, so there was further exploration.

First, I had a guess: China has a lot of irrational investors.

Then I took a look at the relationship between the SSE index and the number of traders:

The above data is from uqer.

Although the statistics are small, from the curve of the number of traders moving with the fluctuation of the SSE index, we can basically conclude:

In China, the number of traders involved in the trading process is very high, and the number of traders is very high, and the number of traders is very high. And these retail investors often trade on the basis of price changes, which means they are irrational.

Because after learning about quantitative investing, one prefers to look at things from a probabilistic perspective.

Further, I have a second guess: in a bull market, or when the index is rising, there will be more irrational investors, and the win rate of technical indicators will be higher.

In order to verify this idea, the use of various technical indicators for stock selection, and the win rate of each year, the results are as follows:

The data comes from Fruit of the Loom, the tuning cycle of 5 trading days, the maximum number of stocks in the position of 10, are backtesting the default value of the indicator.

Picture data is more, may not see very clearly, we can compare the technical indicators of the average winning curve and the year the rise and fall of the SSE index:

You can see that the technical indicators of the winning rate, with the fluctuations of the rise of the index fluctuations, there is a clear positive correlation.

In other words, the speculation is validated.

However, I see a problem in the change in the trend of the winning percentage fluctuations:

After 2012, the fluctuations of the winning percentage fluctuations are more flat relative to the fluctuations of the index.

What's more, the technical indicators' win rates have been below the 50% level.

The win rate is below 50%, so if you are not sure what the concept is, you can refer to the win rate of the casino.

The casinos set themselves a win rate of just over 50%, and the gamblers who take part in gambling have a win rate of just over 40%.

If you look at the gamblers, which of them are profitable in the long run?

So if you're still looking at K-chart trading, watch out.

It's not just that the shifts in the curve affect sentiment, but more importantly, it's no longer possible to try to outperform technical indicators over the long term.