Most of the time, Technical Analysis (TA) can remind a practitioner of “A Tale of Two Cities.” Either price action will respect an approaching support/resistance area (and reverse) or breakthrough (and continue in the current direction). I have been a student of TA and model building for decades and have faced this dichotomy many times. My solution is to create a nonlinear process to guide in what the market is most likely to be thinking.
Isn’t that cheating? What are you, 12? Insider trading is cheating, not building a nonlinear model to help in forecasting price. Perhaps we can draw some inspiration from fictional character Master Sergeant Bilko, he said, “I like a sporting event in which I know the outcome beforehand, it’s more organized.”
Can’t we build our own nonlinear models? Yep, massive spending, hiring titanic sized egos (leading to turnover and organizational information “leakage”) and you still won’t be guaranteed the resulting model will have the “special sauce” ingredients to get the results you will be satisfied with. I haven’t even touched on black swan events. Besides, if you use our signals to help identify trend changes you can have your staff concentrate on other investment enhancing areas like portfolio construction.
But you didn’t get an advanced degree at an ivy league school! If you listen real hard you can hear my teeth chatter. LTCM hired big credentialed personalities and ended up being the subject of a cautionary tale gray-hairs tell their pupils. I have worked at CompuTrac (pioneers in automated TA) and LBS Capital Management (pioneers in artificial intelligence). I am offering my free real-time Bitcoin signals as a character reference. Go ahead and have your highly credentialled team of gender studies graduates compete real-time versus my public cryptocurrency signals and see if… oops, I think I am getting off topic with this “smack” talk. Anyway, if you want me to help, drop me an email.