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The human mind tries to make order out of chaos and sees patterns. When the
patterns are defined mathematically and tested with a computer, the computer
sees all the patterns that didn't work while the human sees only those that
worked. Show me a pattern that can be programmed and works better than 55% of
the time. (My definition of better than random.) Also be aware that there
are patterns that, with careful examination, can be found in random numbers.
The fact that we can sometimes observe patterns does not mean the data is non-
random. One occurrence of non-order is sufficient to disprove ant theory that
the markets are orderly.
I agree with your observation about habit and self fulfilling prophecies.
However these tend to come and go over time depending on what is the popular
indicator of the period. Support and resistance worked much better 20 years
ago than it does today. When J.M. Hurst first wrote his book about cycles
they started working for a period of time but not so much anymore. Most of
the money trading in the markets is now controlled by professionals who use
computer signals that may not be observed by the human eye looking at a bar
chart. (Not to say that their results are any better, only observing that
they are not influenced by the same patterns that you and I might observe.)
I'm sure that the group as well as myself would be very interested in any
patterns that work better than 50% of the time.
Chuck LeBeau
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