Software Stream of Consciousness: The Perils of Technical Trading in Stocks


Software Stream of Consciousness: The Perils of Technical Trading in Stocks: I was first introduced to technical trading as a software analyst. I was hired to write some proprietary algorithms for a stock and commodities trading group. When I was first introduced to the principles of technical trading, I was blown away. I had thought that fundamentals were the only way to trade (in fundamental trading you look at the companies balance sheet and how well it is doing and whether its markets are expanding and contracting. In technical trading, you just look at the performance of the price alone to gauge what will happen next.)


Here is an example of a very simple algorithm in technical trading. The red line is an exponential weighted moving average of the stock price plotted against the actual price day by day. The rule is when the red line is above the stock price, the price will fall, and when the red line is below the stock price, the price will rise. And it can work rather well. READ MORE

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