Friday, November 5, 2021

Quadrants - 2 dimensional Analysis

Many years ago I read a book and the author specifically wrote and stated that know the difference between SIMPLE versus EASY. 

Simple does not equate to easy. Normally, people has the tendency to equate SIMPLE = EASY. This is not the case. To ride a bicycle seems a simple process BUT it is not easy to someone who does not know. You learn to balance, to apply force and momentum. There are no notes to write, read except to practice and practice. There is no rocket science needed.

The author goes on to describe that the act of trading/investing is a very simple act but it is not necessarily an easy task. The breakthrough happens when one is able to focus on the simple process and not complicate it. When one become familiar with the technique and strategy, a simple task become and easy process.

My favorite simple and easy approach is to do a 2-D analysis or 2 Dimensional Quadrant analysis. Using X - axis versus Y- axis.   

 

 

This is the magic box that I use since 1987 to do a simple quick analysis and correlation for all different products. Example

                      Event 1 = Price                                                    Event 2 = Earnings

Upper Left Quadrant = (E1 +   E2 -)  read as Price Up with Earnings Down

Upper Right Quadrant = (E1 + E2 +) read as Price UP with Earnings UP

 

The cycle state will move without any fix order clockwise or anti-clockwise. But it will be in anyone quadrant at any one time.

This will give us a MACRO outlook of the state the current and where it is going next.   

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