I remember taking a course in Statistics where the professor asked use to determine the probability that the universe would create a converse sneaker out of the matter that existing in a specified amount of space.
The funny thin about probability is that there is a percentage chance for an event such a a sneaker being created out of virtually nothing in one brief instant.
Correlation is even funnier in that people with absolutely no capability to apply scientific method attempt to try to connect to events and develop a connection between them even try to develop a pattern where the system would replicate itself.
I.E. The light turns green when I say the word duck. If it takes me about 1 second to say the word duck and I give myself another 1-2 seconds of room to justify that it really worked (causes I'm a biased observer that wants his prediction to be true) and a light takes 3 minutes to change from red to green I have a 1 in 60 chance of my prediction of coming true.
Now this experiment would be unscientific at its extreme. But what if I skew my thinking enough that I say that it doesn’t happen every time. Maybe My ability to change the light to green by saying duck only happens 1 out of every 3 times I try. Well I just increased my chance to 1 in 20. If it happens one out of 20 times I could now start to draw correlations to time of day, the location in the city I did it, if I was eating a sandwich at the time. If my mood was positive of negative, if I had my lucky rabbits foot or not. Pretty soon I'm a traffic light prophet that charges people $5 a month to change the lights for them. I don't even have to be right to everyone. Just to those people who witnesses a random occurrence where I may have changed a light to green 3 times in a row.
Lunar cycles don’t mean a think. I work in a occupation where I have access to statistics regarding full moons and emergency room visits. There is no correlation when you review a large distribution of data. The better correlation is payday cycles. With the proportion of citizens being paid almost consistently every two weeks or mid and end month alcohol consumption increases the following weekends causing more emergency room visits. And they bring in the more violent incidences such as gunshots, car accidents, domestic violence and abuse among the most common.
As far as the excuse that enough people use astrology that it becomes self fulfilling. I think that more people use fundamentals more that technical analysis astrology and dart throwing combined. Squ1dk1d made a very good point that most everyone never figures out how to actually use technical analysis. There is no predictive ability in technical analysis. There is only the fact that the indicators display what is currently happening to price and or volume by clearing some of the noise that are the millions of shares that are being bought and sold by individuals.
I don’t know of how many trading systems I went through before realizing that technical indicators are not predictive. I had random walk systems that would buy stocks randomly and when used with a sound money management system would outperform the very same indicators that were supposed to predict the markets. Of course it did little more than break even over a long enough distribution of trades. But it was the money management system that improved its performance and when applied to various systems improved the statistical results and increased a portfolio.
End result. Nothing beats averaging down on dividend paying investments over the long run in the markets. If you make 2-3% over inflation you are doing well. Well I can’t say nothing. When you have enough capital you can make your won market and convince people that the stock you are operating goes up every time the market turns red.
I remember trading a stock where the company released news consistently on a Tuesday. So much so that after half a dozen news releases the stock ran on Tuesdays even without the press release.
AI
