There is a belief on Wall Street that patterns exist, can be identified and profited off of. This is a mistaken believe. Patterns do not exist, not at least in the way that one could use for predictive purposes.
The market is a complex system that is adaptable and self regulating. It is always different. The factors are different, the people are different and most obviously is that we are not living in the past. For a pattern to have predictive value, the factors must be the same, as is the case with scientific experiments. Human behavior cannot be predicted. Yes, there are some cute tests that show our biases, the they only remind us of our short comings. As a group, we are very unpredictable.
So do not believe in chart patterns. Here is the infamous Megaphone pattern. It sounds really good, but it is just not true. At best, the predictive value of this or any pattern is around 50% or random. From the The Street article:
No comments:
Post a Comment