This type of research is useful for several reasons. First, all markets have tendencies; taking the time to document them allows you to develop trading approaches based on hard data rather than visual chart inspection or “gut feel.” You can work with probabilities regarding the market’s price action today and tomorrow.
Also, this type of analysis is easily expandable to larger time horizons and different tendencies. For example, you can find out what happens (if anything) the day after back-to-back up closing days with ranges larger than 90 percent of all ranges.
Finally, having typical-behavior stats in hand will allow you to quickly spot when a shift in a market’s underlying fundamentals is taking place.
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