Saturday, January 30, 2021

The dilemma of the chart trader or the non chart trader

 I will classify the existing analysis used by traders/investors/speculators into 2 approaches namely the charts and the non-charts methods.

The non-charts method include the Financial analysis and any other methods that do not use chart technique.

The chart technique is suppose to be simple straight forward without too many "justifications or confirmations" to rationalize or substantiate the actions taken.

The history of chart began with the records of price actions - Open-High-Low-Close. Such exists prior the invention of computers. Chart is about trend and trend is a collection of price actions. Obviously someone decided to infiltrate price analysis to include volume behavior into the equation.

This brings me back to the basic lessons in physics when we refer to directional motion or directional path. When we analyze the motion of the object from the start to the end of the motion, we only record the changes in velocity along the path. The acceleration, the deceleration, the steady state and the end. Does it mean that the changes to the mass or weight is needed to confirm the object motion state?

Adding more variable(s) into the analysis do(es) not translate into accuracy or reliability. More likely it is going to add more confusion(s).

We will need to define what the trend is and anything not within the parameters is automatically classify otherwise. The oldest approach that I am aware is the TRENDLINE and later the popular Moving Averages.

The next step is to classify what is accepted as the trend change for the end of the existing trend and automatically is the start of a new trend.

The final step is to develop a plan how u manage the bumpiness or volatility between the start to end of the trend.

      

No comments: