Market moves in a Random fashion. But our human mind will always want to think in an harmonic fashion and tries identify with worldly objects or patterns like Line, Triangle, Rectangle, Square, Semi circle. Our human mind cannot visualize a Random pattern because we have not learnt those shapes in the school.
So at the end of the day we Try to FORCE FIT the Markets RANDOM Movement into some Trend so that we can find out the Resistance and Support Levels and Initiate our Positions.
Recently I am trying to Fit market movement into a Polynomial curves. Polynomial curves is simply a curve with an order or Degree...
If you take Polynomial curve of
Degree 1 - Straight line
Degree 2 - Two lines - One UP and One DOWN
Degree 3 - Three lines (If the stock had three movements UP or DOWN)
So if you take a Lower time frame chart like 10 min Chart and if you plot 80 10min candles normally it will represent the stocks movement for a Day or Two and So minimum you should one or two movements. Meaning it would not have a moved in a straight line. So it would be good if you can plot the major trend as the 2 degree curve and the minor Trend as a 3 degree curve. The 3 degree curve should be give you the lead as to what is going to happen next, basically the Reversal indicator.
Likewise if you plot 80 hourly candles, then you will be plotting the values for at least 6 or seven days. So you will have at least three Trends or Lines. So it would be better to plot the Major Trend using a 3 degree curve and plot the minor Trend using 4 or 5 degree curve.
When I post the chart you will be able to understand what I am talking. I will try and post the charts this evening.
So the idea is to move away from Looking at the Market movement as a linear Trend and to look at them as different waves. This will not completely address the Randomness of the market. But at least we can move away from the Order 1 to Order 2,3,4,5,6 based on the Time frame.
So at the end of the day we Try to FORCE FIT the Markets RANDOM Movement into some Trend so that we can find out the Resistance and Support Levels and Initiate our Positions.
Recently I am trying to Fit market movement into a Polynomial curves. Polynomial curves is simply a curve with an order or Degree...
If you take Polynomial curve of
Degree 1 - Straight line
Degree 2 - Two lines - One UP and One DOWN
Degree 3 - Three lines (If the stock had three movements UP or DOWN)
So if you take a Lower time frame chart like 10 min Chart and if you plot 80 10min candles normally it will represent the stocks movement for a Day or Two and So minimum you should one or two movements. Meaning it would not have a moved in a straight line. So it would be good if you can plot the major trend as the 2 degree curve and the minor Trend as a 3 degree curve. The 3 degree curve should be give you the lead as to what is going to happen next, basically the Reversal indicator.
Likewise if you plot 80 hourly candles, then you will be plotting the values for at least 6 or seven days. So you will have at least three Trends or Lines. So it would be better to plot the Major Trend using a 3 degree curve and plot the minor Trend using 4 or 5 degree curve.
When I post the chart you will be able to understand what I am talking. I will try and post the charts this evening.
So the idea is to move away from Looking at the Market movement as a linear Trend and to look at them as different waves. This will not completely address the Randomness of the market. But at least we can move away from the Order 1 to Order 2,3,4,5,6 based on the Time frame.
