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I would like to continue my previous article by adding something more to it.
Unrealistic expectations on chart analysis:
Subjective traders, no matter what strategy they practice, they believe in their own efficiency in visual analysis of market charts. Price charts are trusted to be valid in detecting potential patterns in them; this is what the pioneers of technical analysis discovered and that’s what most of us use today. The human mind has the capacity and need to find order in what it experiences. We have the tendency to accept in an intuitive, non-scientific way impressions, but unfortunately in many cases what it seems at first sight may not be a valid thing.
Our brain is dependent on seeing shapes even if they are not real. Dr. John Elder, an authority in predictive modeling, calls this phenomena the “bunnies in the cloud” effect. Trends and patterns on market charts that appear real to the human eye may be just illusions created by the mind’s tendency to find order. Of course clear patterns and trends can be identified on charts and there are studies that shows that there are patterns which are valid predictive. However, only visual inspection of charts is not enough to g…
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9jakas avatar
9jakas 14 Aug.

The tip of the iceberg, beautiful

Ivory avatar
Ivory 14 Aug.

Thanks

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Technical analysis can be divided in two major categories: objective and subjective. Subjective technical analysis is defined by methods and patterns that are not clear, and a conclusion from this type of method reflects the personal interpretations of the analyst. This creates the possibility that two analysts applying the same method to the same data can have different conclusions. Because they come from personal experience, these methods are not testable. Subjective technical analysis cannot be called wrong, this would have been in the case when it can be tested and rejected by evidence. Nevertheless, if you ask traders about it, many of them will strongly believe in their own subjective analysis. This is a consequence of the erroneous beliefs.
The human mind is built to look for and find patterns, even if they are just an illusion. Human nature is repulsed by the new, unpredictable and unexplained, so our mind tries to seek order and patterns. Acquiring knowledge can fail in the following ways: learning falsehood or failing to learn the truth. Of these two, the mind is more keen on adopting falsehood.
Cognitive phychology is concerned with how humans process information, draw …
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Agnessa26 avatar

Good job

Ivory avatar
Ivory 8 Aug.

Thanks for the feedback.

9jakas avatar
9jakas 8 Aug.

Good work

Ivory avatar
Ivory 8 Aug.

Thank you, good luck to you too.

orto leave comments