You can find, or rather extract, mathematical relationships to ANY series or sequence of events, but only AFTER the fact..
Rick's a really good guy..but he should stick to RANTS from now on..
Criminal minds? What is that?
1.1.2.3.5.8.13.21.34....
Part of what makes technical analysis of securities work is that so many people use it. ie, it is a self-actualizing result by traders. And because other traders use it, I’ll use it.
The greatest fraud perpetrated upon the investing public in the last 30 years have been two theories about securities:
1. That securities price movements are random, and can be modeled with Gaussian distributions.
2. The Efficient Markets Hypothesis, wherein advocates claim that everything known and unknown is priced into a security.
Since Rick has spent quite a bit of time in trading pits before he became an on-air color commentator for CNBC, he’s got some perspective of what he speaks on trading. There are some guys who trade on chart patterns, some who use Fib fans/retracements, some who are advocates of Gann patterns, some who use candlestick patterns, some who use point-n-figure charts to find patterns... they all work to some degree on some securities some of the time.
The secret to making a profit in using these things in trading is to contain your losses. There are really only four things that can happen to the price of a security:
1. It goes up a lot.
2. It goes up a little.
3. It goes down a little.
4. It goes down a lot.
In trading, I insure that I avoid 4 and some of 3 through loss containment. The rest of condition 3 that I don’t contain by pruning losses is equalled over time by condition 2.
Too many people look for the “magic predictor” that gives them a home run every time. No such thing exists. If I’m doing everything correctly, only about 55 to 65% of my trades are profitable. Maybe one in 15 are over 10%.
IMO, too many “professionals” fed the retail investing public utter pablum about “buy and hold” and these poor people have been screwed out of huge sums in the last 10 years. We’ve had 10+ years now of sideways movement in the equities markets in the US, and we’re bound to have at least another five years of really choppy markets.
I learned about it (and later forgot) from Mathnet years ago:
http://www.youtube.com/watch?v=vLhQfcZ-BWk
http://www.maths.surrey.ac.uk/hosted-sites/R.Knott/Fibonacci/fibnat.html
Fibonacci Numbers and Nature
http://www.youtube.com/watch?v=R6ft90FLI-I
Fibonacci Forex Trading
http://www.youtube.com/watch?v=kkGeOWYOFoA&feature=related
Nature by Numbers (Beautiful Fibonacci illustration)