Forum Views - March 2023
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FORUM VIEWS - MARCH 2023
s a trader or investor, it is essential to develop a
process. Using the same checklist or rules by which
Ayou determine position entry and exit creates a
repeatable discipline for trading that helps avoid behavioral
pitfalls. Technical Analysis provides a broad toolkit of
indicators that, when used in combination, give the trader a
weight of the evidence perspective that can be used across
timeframes and in any market regime. While the composite
blend of information is powerful, the complexity of a price
chart can lead to Analysis Paralysis.
As a metaphor for portfolio management, imagine you are a
young person learning to drive. Safety (risk management) and
efficiency (profitability) require that you master many different
functions of the vehicle and be able to interpret in real time the
many challenges that await you on the roadways (markets).
Driving can be fun, but involves inherent risk, and the many
functions of the car can be overwhelming. As a young adult
you learn that every single time you get into your vehicle it is
not only sensible but potentially lifesaving to follow a "new
driver checklist". It could look like this:
• Adjust the seat and steering wheel positions to reach gas,
brake, clutch
Developing a Process
• Fasten seat belt
• Adjust mirrors and check for obstacles at the rear and
sides of the vehicle
• Check all lights are functional
• Engage brake when starting engine
• Signal before driving off
And, while driving there is a myriad of information to process
and react to in real-time, speed, distance from other cars,
navigation, fuel levels, gear shifting, etc…
The disciplined approach to driving makes one a more
responsible and importantly, a safer driver. We all have a
checklist to follow even though it may be largely subconscious
for experienced drivers.
Insights
AVOIDING ANALYSIS PARALYSIS
Tyler Wood, CMT
Managing Director
CMT Association
The same approach applies to using technical analysis for
investing in markets. A disciplined process that applies the
same checklist to every trade ensures we don’t make irrational
decisions based on our own fear or greed. A diversified blend
of technical indicators adds probabilistic rigor to identifying
trends and their reversals. As investors, we seek to participate
in the majority of a security’s price move while avoiding the
hazards of the financial markets. We seek an intelligent
framework in which to invest; one where we can make fast,
effective decisions based on objective information. A
technical analysis checklist might include the use of:
• Trend lines
• Moving averages
• Momentum analysis
• Volume analysis
• Price patterns
• Dow Theory
Sophisticated traders and portfolio managers develop their
individual technical checklist over time. They have faith in their
As a trader or investor, it is essential to
develop a process. Using the same
checklist or rules by which you
determine position entry and exit
creates a repeatable discipline for
trading that helps avoid behavioral
pitfalls. Technical Analysis provides a
broad toolkit of indicators that, when
used in combination, give the trader a
weight of the evidence perspective
that can be used across timeframes
and in any market regime.
(New York, United States)
“We are what we repeatedly do”
- Aristotle.
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