Technical Analysis

Technical Analysis

Now that we had a little fun getting to know Dr. Tumbili’s harsh view on Wall Street, and we know the “real” History behind Technical Analysis, this next session will definitely put things under perspective.

Right? Yeah, riiight!… ­čśë

Let’s scale it down a bit, shall we? The idea, of course, is to neither get technical nor academical in Technical Analysis matters. Many great books and courses exist, online and offline, to teach us the minutia of such a complex and extensive subject.

What, then?

 

No Technical Analysis, No Robot

Exactly, it is that simple. If we want to develop our final creation, the R3D3 Trading Robot, we’ll NEED to base it on Technical Analysis.

There’s NO way to create procedures without using parameters. In other words, there’s no way to build a robot without “quantifying” market behavior!

Period.

 

Simple Indicators, Simple Robot

I apologize for such crude language. I’m right now feeling that I am the robot!

Anyway, this is also true. If we want to develop a simple robot, we need to rely on simple Indicators.

Technical Analysis is full of them. Taken individually, ALL Indicators are simple, clear, and pretty much straight forward. What makes Technical Analysis a mess is the combination of many Indicators, which unfortunately is part of the everyday life for millions of traders!

Why?

I don’t have the answer for that, but I’ll dare to submit a theory here. Please feel free to mock me if you disagree:

FEAR!

Yes, fear. And fear has many variations, some pretty obvious, others a bit subtle. I’m not opening a discussion towards the obvious reasons.

Among the subtle, though, there’s one that keeps coming forward from the back of my mind:

  • A┬ácertain need for “constant confirmation” – a close relative of the infamous “paralysis analysis”!

For me, it’s a dangerous phenomenon that alienates many traders from consistent profit. A cat and mouse game prone to paralyze the great majority of rookie traders, but also a significant portion of the seasoned ones.

Most traders feel secure if price movements are graphically surrounded by a pandemonium of colored lines, each one having its own agenda in highlighting, essentially, support and resistance levels!

Things get even worse when different time frames are compared side by side, ALL showing their own colored lines, ALL very important, and for some of those traders, ALL essential to their trading game!

A fascinating phenomenon, called fractal geometry, adds to the mess!

Now you can see why engineers, myself included, jump at the opportunity to complicate things, when they start trading. Most never let go…

 

Deconstructing To Simplify

The big idea here, the secret to our R3D3 success, is for us to start deconstructing this mess.

To simplify things to the bone.

To start all over again, understanding the purity and essence of each simple Indicator at a time, choosing the one (or two) that most reflect the personality of R3D3.

Thanks for watching…

 

Comments

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    • Hi Sylvester, thanks for your comment. I’d love to hear from you… and your ideas!

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