Friday, February 27, 2015
When elephants fight, it is the grass that suffers. This ancient proverb of the Kikuyu people, a tribal group in Kenya, Africa, is as true today as when the words were first spoken, perhaps thousands of years ago.
This is why I use technical analysis of markets. A close and sustained look at price and volume and how they can provide insight into the formation of trends, consolidations, and trend changes keeps this blade of grass from getting trampled by the elephants.
Here is a report on Bridgewater and how they supposedly plan to use Artificial Intelligence to trade more effectively. They are chasing the holy grail. They all do. The problem that the successful hedge fund managers have is that they are too successful, meaning that they get too big. They are the elephant in the china shop. When they move they cause things to rattle. They have so much money to put to work that they cannot help but move nearly any market they get into. And if one of them finds a successful strategy it will immediately be copied by other large players and will cease to work.
This is where the tape reader and trend follower has an advantage. Watch the prices move, and watch the volume that happens as they move. Size creates volume. As the elephant moves into the water the water moves in waves.
Dalio and Bridgewater