Occasionally you come across a video on You tube that really resonates. Here is a great example from Richard Rossouw. Despite the sad tale, there is hope for those traders that can see through the noise for the slight signal…..but what we need to do at least is to recognise the efficiency of modern markets and pay due respect to them.
Of course if the financial markets were purely efficient then we, as speculators, would have no chance of success….but this inefficiency is not easy to crack with purely observational methods and we need statistical tools and operate in the Law of Large Numbers to solve these puzzles.
This cautionary tale is explained further in our Blog post “Don’t be fooled by market randomness” which offers a message of hope in trusting the data and not your eyes in extracting alpha from the marketplace.
For those of you that might want to delve further into an approach that enforces a degree of empiricism into the art of technical analysis, then the following book from David Aronson is an excellent and sobering read. This is not disputing that all forms of technical analysis are defunct…but rather instilling a degree of caution into the propensity to make predictions based on chart patterns that within efficient markets are frequently constructed through pure random outcomes.