Finding patterns in market data

On a weekly basis, we’re confronted with comments like:
“I can see patterns in the charts.” (No you cannot)
“I trade fractals in bar charts” (Fractals are not 2 dimensional)
“You just have to look at the charts and see the patterns.” (No, just no)

Don't get us wrong. There are patterns in every market. But observing those patterns requires an enormous amount of data, math and physics.

Observing patterns
“Observing” a pattern while looking at a chart is not only a wonderful way to lose money, but it’s nothing more than confirmation bias. If you’re bullish, what you “observe” is going to be bullish. If you’re bearish… what you see looks bearish.

“Finding patterns in market data” in charts is equivalent to filling up a glass with ocean water and concluding, “well, clearly there are no fish in this ocean.” The quantity and quality of data you absorb means a lot. Take a step back and consider how little of that data your current bar chart represents… and then ask yourself, what does it all mean? (did we do too far with that one?)

The math
Our current data set for the S&P includes over 1.5 quadrillion points of data. That’s a one with fifteen zeros behind it (1,500,000,000,000,000). For the Dow, the data set is even larger with over 2 quadrillion points. For Gold, it’s 512 trillion (or half a quadrillion). Smaller markets like Soybean Oil include 60 trillion data points.

It’s a lot of data… and more than enough to develop fractals in search of infinitely repeating patterns. If you want some help finding real patterns in enormous amounts of data contact us.