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Brain Teasers. You have 8 red and 16 blue socks. There’s no light in your room, so you have to choose your socks in the dark. What’s the minimum # of socks you need to choose to ensure you have at least a matching pair. Answer. Three

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brain teasers
Brain Teasers
  • You have 8 red and 16 blue socks. There’s no light in your room, so you have to choose your socks in the dark. What’s the minimum # of socks you need to choose to ensure you have at least a matching pair.
answer
Answer
  • Three
    • Two socks can be different, but a third must match one of the first two
what is technical analysis ta
What is Technical Analysis (TA)
  • What determines the price of ____?
  • Fundamental vs. Technical Analysis
    • Fundamentals = Valuations
    • Technicals = Market Action
  • TA is probabilistic
    • Says that this is “likely” to happen
assumptions
Assumptions
  • Prices SOMETIMES move in trends
    • “Markets may witness extended periods of random fluctuation, interspersed with shorter periods of nonrandom behavior. The goal is to identify those periods” –Shcwager
  • History repeats itself
    • Because of market psychology
  • Market efficiency
charting patterns
Charting Patterns
  • Visualize price movements
  • Can be simple “eyeballing intuition” or looking for specific patterns
  • Many charts use Candlesticks
eyeballing
Eyeballing
  • Trade on up/downtrends
    • Breaks support/resistance
head and shoulders1
Head and Shoulders
  • Target = High/low point -/+ neckline
  • The more level the neck, the more reliable the pattern
double top bottom
Double Top/Bottom
  • Have to keep tight stops in case support/resistance is broken
hook reversal
Hook Reversal
  • Most reliable after strong trends
slide14
RSI
  • Momentum indicator
    • Shows breakouts or trend reversals
  • Leading indicator
  • RSI=Avg closes up / Avg closes down
  • 14,16,9,25 day lookback
slide15
MACD
  • Momentum indicator
  • Lagging indicator
  • MACD = difference b/w fast and slow moving averages
    • Generally 12, 26 period EMA’s
  • Signal line
    • 9 period EMA
  • Can turn into leading indicator
  • Works best when used with another indicator
bollinger bands
Bollinger Bands
  • Price/Volatility levels over time
  • Consists of 3 bands
    • Usually 20 bar SMA, 2 std devs
  • Gives a relative level of high/low
  • Multiple ways of trading
    • Most effective is range trading during low vol periods
  • Options implications too
when to use ta
When to use TA
  • “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” – Buffet
  • Entry/Exit prices
  • Algorithmic Traders (computers)
  • Markets
    • Currencies = Great
    • Futures = Great
    • Stocks = Decent
algorithmic trading
Algorithmic Trading
  • All you know is prices
    • Understandable why algorithms almost always are technicals based
  • All algos have a thesis behind them (when X happens, Y is likely to happen)
  • Can be very hard to code ideas sometimes