There is a recent, very readable paper from Stephan Schulmeister called The Profitability of Technical Stock Trading has Moved from Daily to Intraday Data. His abstract goes like this:
This paper investigates how technical trading systems exploit the momentum and reversal
effects in the S&P 500 spot and futures market. The former is exploited by trend-following
models, while the latter by contrarian models. In total, the performance of 2580 widely used
models is analyzed. When based on daily data, the profitability of technical stock trading has
steadily declined since 1960 and has become unprofitable over the 1990s. However, when
based on 30-minutes-data the same models produce an average gross return of 8.8% per
year between 1983 and 2000. These results do not change substantially when trading is
simulated over six subperiods. Those 25 models which performed best over the most recent
subperiod produce a significantly higher gross return over the subsequent subperiod than all
models. Over the out-of-sample-period 2001-2006 the 2580 models perform much worse than
between 1983 and 2000. This result could be due to stock markets becoming more efficient or
to stock price trends shifting from 30-minutes-prices to prices of higher frequencies.
One of the interesting comments he makes is that contrarian strategies appear to be more profitable than do trending strategies.
In the article, the author offers up some possible reasons why technical trading is harder (but I should temper that remark and
say that successful trading is more profitable with 'higher frequency' data--5 minute bars over 30 minute bars or daily data):
The decline in the profitability of technical trading based on daily data could be explained in
two different ways. The "adaptive market hypothesis. (Lo, 2004; Neely-Weller-Ulrich, 2006)
holds that asset markets have become gradually more efficient, partly because learning to
exploit profit opportunities wipes them out, partly because information technologies steadily
improve market efficiency (Ohlson, 2004). The second explanation holds that technical
traders have been increasingly using intraday data instead of daily data. This development
could have caused intraday price movements to become more persistent and, hence,
exploitable by technical models. At the same time price changes on the basis of daily data
might have become more erratic. This would then cause technical trading to become less
profitable based on daily prices (but not on intraday prices).
Another interesting quote I came across regarding how everyone's trades get jumbled together, and what trader's think about it:
... traders have to form expectations about expectations of all other
traders (Keynes. "beauty contest. problem).