Tuesday, September 20, 2011

It is Probability

On yesterday's NR7 and my suggestion that expansion should follow, Balu says "Perfect prediction.. expansion on the very first day after nr7"

My Notes: Thanks for the kind words, Balu. But, there is no prediction involved in technical analysis. TA is about probability. Only the Good Lord can predict the future. Who else knows what the next moment will bring? So, as a market technician, I never claim to predict anything. Readers should also be aware that they are NOT predicting, but discussing probablilty.

For the NR7, there is a fair chance that this pattern leads to expansion. Therefore, we should take the trade with proper risk management. Suppose, after NR7, instead of expansion, a choppy day comes about. Does that mean (a) I did not predict well, (b) the NR7 is an ineffective pattern, or, (c) technical analysis doesnt work.

I know that readers will understand that neither of the three options is fair or valid. If the pattern does not work on any given day, that is probability for you. On some days it makes money, on some days it does not. Finally, the money made should be more than the money lost.

Again, I realize that Balu was simply discussing the benefits of using a pattern, and, this post appreciates his comment which enabled me to highlight an important point.

Reader views are welcome.

3 comments:

Balu said...

Yes Sir, it was only a cheering reaction.. this morning before going to office i read the post and as a result I realized soon what was in store for today and acted accordingly.. so when I returned for lunch I have just quickly reacted that way..

But Sir, it is only as you said simply discussing the benefit of using a pattern..

Regards
Balu

K_Vir said...

Dear Sh. Sudarshanji,

Really appreciate your humility. It is great that you share such golden nuggets regularly.

One question: What is definition of range ? Only body or entire candle ?

Warm regards.

jigs said...

Charts do not provide a prediction, they provide a possibility! that is the function of a chart.