Thread by @AlgoHammie

Thread: About Technical Analysis, Charts and The Realm of Shadows

"My mind is not my best friend when it comes to highly profitable trading. I don't believe for one second that technical or fundamental analysis are the Holy Grail."

- Tom Hougaard

1/ Continuation of the previous thread:

https://twitter.com/AlgoHammie/status/1400037218014617603?s=20

2/ "I like charts, I could devour 1012 hours every single day.

I analyze purely to train my
mind but I'm also fully aware of the way
my mind works"

3/ "See, the problem here is, ladies and
gentlemen, that we have a brain which is
at best chaotic and, at worst, just our
worst enemy.

One of the little intricacies of our brains is that it has a tendency to see things that aren't there."

4/ "This is a phenomenon that in Latin is called Apophenia.

Now, if I was going to translate apophenia into a common language, it would be something along the lines of "pattern creation" - the tendency to perceive meaningful connections between unrelated things."

5/ [ Hammie Note > Apophenia: The term apophenia was coined by German neurologist and psychiatrist, Klaus Conrad, and literally means ‘unmotivated seeing of connections’.

We love to connect dots, don’t we?

6/ It is always easier to say, that something happened because of something. Whether it is situations or objects, we love to find a link and reach a conclusion. Sometimes, even if it isn’t there. Basically, we like to find a pattern in randomness.

7/ "So when you think about the nature, for example, of indicators, let's take some common known indicators like Fibonacci.

When a market makes a 61.8% retracement some would argue that this is the ideal time to either buy or sell short depending on the direction."

8/ "And if that fails then there's also the 78.6% retracement, and why not throw the 88.6% and 94.5% ratios, there's always a ratio for the particular season."

9/ "The majority of indicators are available to the majority of people yet considering that 90% of all people engaged in trading are losing, maybe it's a time we have a real long hard look at what it is that we're actually doing when we are trading."

10/ "See, the purpose of trading is for us to make money, the purpose is not to be right."

[ Hammie Note > Real traders never care about "being right". 90% of people in CT care almost only about being right. Think about it.

11/ "There is one single raw purpose to reading a chart and it is to make as much money as possible and the way you do that is simply to begin to think differently."

12/ "We don't really see things as they are, we see things as WE are."

13/ "What I call the deception chart is that our eyes will seek out that which confirms the facts that we are seeking to establish or to prove."

14/ "When we get engaged with technical analysis that we begin to connect one high with a secondary high and a third. We extrapolate a line out in the future and we call that a trendline, and when a trendline has been broken we get a signal that's called a trend line break."

15/ "It's a thing of beauty because, hey, it looks so easy when we are sitting doing our research.

But, as I said, the deception of charts (what we call apophenia) is playing a trick with us."

16/ "Many a good strategies has been created on paper that are completely impossible to implement in real time."

17/ [ Hammie Note > in real time, we will ignore most of the trendlines that don't serve our bias. Also, all the trendlines on the infinite timeframes we're not watching.

You can literally place random lines everywhere on your chart and see what happens.

18/ Let's play a game.

Hide the price action on your charts. Then draw several horizontal or oblique lines, randomly. Show the price again.

Now notice how price reacts to those lines.