Technical Analysis & The Importance of Simplicity

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

Exhibit A

 

Exhibit B

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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