There is a lot of technical analysis happening in the crypto currency world. Also on Steemit, I see a lot of those posts. If you encounter terms like supporting lines, Fibonacci lines etc., you are in the world of technical analysis.
Technical analysis assumes that all information on market behaviour can be found in the daily data of the market, e.g. lowest/highest rate, opening/closing rate, volume etc. A typical technical trader for example will look at the general bearish or bullish pattern and will look at how the rates are fluctuating up and down in that bearish or bullish channel.
Action will be taken when the rates are close to the extremes in that channel. If you can see from the daily data when traders are taking action, well… You could be a bit ahead of them, don’t you?
I did a major research on technical analysis about 25 years ago. I spent many years of my life watching trend lines and a zillion other indicators, my father worked on the stock market. It ended up in writing a paper called "Computer Aided Technical Economic Research", a term I coined because I was the first one to do this kind of work.
I do love my Steemit brothers and sisters so before you all get busted by blindly listening to this advice, I want you to know what this advice is worth and take your own conclusions.
Today, I want to write you about what I did and how my work got evaluated by the academic world. Back in the days of the very first pc’s, I wrote a huge program that generated research on indicators, playing with every possible parameter to find patterns that work and to test patterns that were claimed to work. It was more than a research tool, it was a tool that generated research, big difference!
I could prove with 10 years of historical data that some patterns were 90% statistically followed by a serious up or down. I will publish some of these results in future posts if I see there is an interest for it but here and now, I want you to know how the academic world reacted to this.
My paper was evaluated by a jury with 1 economic professor, 1 IT professor and 1 professor statistics. The IT professor gave me the absolute maximum score because he loved the meta concept of a program that generated other programs that did the research. The economic professor went wild because he wanted to have such a tool, he wanted to know all the results, but the 3rd professor, the statistics guy, he laughed his head off, he f@##@ gave me the absolute minimal score. I truly hated him and fought him in my mind for the next 5 years.
What he actually was saying is that you can always find something that works on historical data. One of the first things you learn in any statistics class is that correlation doesn't imply causation. An interesting funny example? Ice cream consumption leads to murders.
Now you can google a lot of these funny correlations, I also googled to give you an example but if you look at the bottom of these graphic, you see this correlation is about 3 months data. I hope it is clear to you that it will be much more difficult to find these funny correlations when you look at 10 years data, right?
Anyway, I tell you this story today because I want you to know that pure statistically, technical analysis is not supposed to work. However, I also want you to know that some signals do work. I promise to write further on my research with information on some good working signals but I don’t want to write for myself. If you like this kind of post or knowledge, please say something. I am not asking to upvote or to follow me, just want to know if there is interest.
I probably will end every post saying that the best way to make money in life is to just do what you like and the money will follow. I am doing something I like today. I am here, you are here, we both write some stuff, we can say what we like, we can help each other, we can promote good content, we are getting a bit of compensation for it. We are actually using something which is already based on this most amazing blockchain technology, we are ready to say f@@# you to FB and the likes. Let’s start this revolution here and now!
Take care,
bub