Deterministic techniques in a non deterministic environment.
It came to my attention that there are quite a number of members that are involved with Technical Analysis and apply it to the Peregrine charts. I have studied TA many years ago and kind of never used it. The reasoning for that was the following.
TA is based on deterministic reasoning. It defines conditions, no matter how complex or sophisticated, and relates them to a prediction by example.
If x,y,z then the a,b,c should etc. That is a 100% sure deterministic based reasoning because given the exact replication of x,y,z it assumes a,b,c to happen again.
Over time this reasoning has been moderated and percentages of success where introduced. In p% of the cases if x,y,z then a,b,c will happen.
As the field further evolved the concept of context was brought it. Therefor x,y,z could have a different effect depending on what happened shortly before or on the general market sentiment, etc.
Before we knew it was clear that many parameters had to be considered. What stock is it, what is the sector doing, the influence of specific news, the general global context, war, peace, momentum etc.Bbecause that requires more specialized know-how and it doesn't sell very well the inventors of methods have simplified there approach and often only look at some indicators. Buy the book, follow the training or subscribe to some site and you are in business. Then make sure you add the sentence: "It works for me, if it works for you use it, else don't". As of that point if it doesn't work for someone it is clearly that persons fault and not that of the offered system.
Today the emerging black-boxes with sophisticated algorithms and as RRDog mentioned survey systems and speed improvements are invalidating the basis models for TA methods. TA worked some because if many people are looking at the same type of indicator/graph and take decisions based on a same set of rules they amplify the effect the system aims for. Black-boxes introduce a random behavior undone from all usual logic.
I was wondering who has sufficient historical data on a market with a double (US/European) crises in a chain of crisis's and with the emerging black boxes and the exceptional high levels of shorting embedded in that historical data to see if the TA methods still work!
We all know the answer, no one yet because that data doesn't exist in sufficient amounts yet!
So to all of you that still do TA maybe this is the moment to come up with inventive new ways to beat the system because otherwise the inventive box-builders are going to take your money.
The markets are not a deterministic system because its drivers learn, change and adapt by which they change the outcome and make it unpredictable. Today x,y,z may occasionally result in a,b,c. This is in favor of investing based on fundamentals of a company such as Peregrine.
