Technical Formations and Cycles
MORE NOTES TO MYSELF
I'm convinced the market is capable of turning *any* formation and any cycle in any direction it chooses. Head and shoulder formations can twist and break upward. Cycles can left and right translate or cut deeper or higher at any point in time.
The benefit of any formation or cycle projection is to provide a hypothesis concerning what may happen. Some formations offer higher probabilities than others. For example, I find bearish and bullish wedges highly reliable. And Hurst cycle analysis offers some of the best predictors of market performance.
Still, at this moment, anything can happen at anytime. Any cycle can run dead on into an unanticipated force--for example, a terrorist attack or a left-translated 8-9/4-4.5-year cycle.
It is a mistake for me to become ego-invested in any particular analysis or recognition of a formation. It's a perfect setup for poor trading. Instead, use the formation to develop a hypothesis of what might happen, and then trade only on the step-by-step verification or rejection of the hypothesis based on the crossing of trendlines.
Recognition of a high-probability pattern/cycle verified by a crossed trendline raises the probabilities near 100 percent. Crossed trendlines can be headfakes too of course, but combined with sound technical analysis, headfakes can be screened to a rare occurrence.
The problem with ego-investing in any particular analysis is that I enter trades too soon and hang on too long waiting for proof that I'm right. And then if the market twists and converts my high-probability pattern into a nasty surprise, I take it personally, thinking I'm lacking intelligence or skill. The mistake may simply be thinking that the identified pattern *must* unfold in a particular way. It may or may not.
The bait that leads to premature trades is that by getting in early I get the best possible price--before the market gaps in the desired direction. Waiting for the market to verify my hypothesis by crossing a trendline is the most profitable in the long run. I might lose a little profit at the beginning of the trade, but I hit the sweet spot over and over again.
Black
AI
