Ley Lines Lie
I’ve previously written about how evolution has equipped us so well to see patterns (the stripes of a tiger hiding in the grass) that our neurological wiring picks them out even when they aren’t really there. Not surprisingly, that potentially includes lines on trading charts. I try not to think about it too much but I worry that a lot of the lines that I spend the day drawing are just the erroneous products of an over-active, pattern-seeking mind.
A non-trading example of this phenomenon is ley lines, the belief that certain geographical features are aligned along straight lines, a sort of mystical line of support!
- Spooky? Maybe, maybe not.
But the problem is that if you are a bit selective with your data, a bit tolerant of deviation and get a helping hand from our old friend randomness then you can make just about anything follow remarkable linear patterns, even Woolworths (RIP) stores. The image is appropriated from here where you can also find more information on the subject.
- Less spooky.
So next time you are drawing lines on a chart, forget you ever read this or you’ll be stuck with a blank page, or worse than that you may start using indicators.
- Possibly spooky, possibly profitable.
Mmmmmmm, indicators….
Attitude Trader
January 18, 2011 at 6:30 pm
It’s funny you should mention that, I had a look at those charts as promised but couldn’t see the wood for the MACD-trees
(positive results though, nice work).
long&wrong
January 18, 2011 at 9:03 pm
Precisely why I made the comment. When you said you were going to look at them later I knew I was going to hear about it!
Attitude Trader
January 18, 2011 at 11:43 pm
By the way, where the heck do I find Hogwarts on those maps?
Attitude Trader
January 18, 2011 at 11:45 pm
I’d like to make a reader request if could.
I was wondering if you might make a post about your “bad” trading days – bad meaning you lost money, just traded badly, or both.
More specifically, how many “bad” days you tend to have in a month, and how you deal with them the following day. I know that “days” have little meaning with regard to the trades themselves because it’s really just a never-ending stream, but psychologically it’s easy to let those days have a negative effect.
Thanks in advance.
Attitude Trader
January 25, 2011 at 7:34 pm