Technical Analysis & The Importance of Simplicity
- Posted by ppearlman
- on August 31st, 2011
Simple statements are to be prized more highly than less simple ones because they tell us more; because their empirical content is greater; and because they are better testable.
– Karl Popper
I view charts as a representation of market behavior, the only mode of market experience which can be objectively observed.
Future behavior can be derived imperfectly from past behavior.
The best chartists recognize predictive patterns in accordance with the law of parsimony for the reason Popper captures in the above quote. Sure, they are easier to understand but, importantly, they are also more falsifiable.
Note Exhibits A & B
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Phil is the interactive editor at Yahoo! Finance. Formerly, he was the executive editor at StockTwits. He is a partner at Social Leverage, LLC and makes early stage investments in web based companies. (More)