We’re designed to hunt woolly mammoths, not trade stocks!

I found a really interesting article on trading and how pattern recognition by the human eye can be a challenge for people.  It was translated from Khomich Andrei Vladimirovich, Ph.D. (Physics and Mathematics), a Russian professor.

He disagreed with the belief that by studying market charts carefully we are able to consistently see popular charting trends, like head and shoulders, cup with handle,  double top and bottom etc. (I apologize if these mean nothing to you, but that’s what they are called!).

It was his opinion that these mainstream trading patterns do not work as they rely on the human eye to spot them and argued that we are not designed for such a task.

He stated that the problem is that the human visual system had been evolving for many millions of years to perform such tasks as mammoth hunting, yes, I actually just said Mammoth hunting!  But there’s more…

He goes on to explain that genetically we are Cro-Magnons (described in wiki as early Homo sapiens), pickers of mushrooms and berries, hunters of beasts…although, I must admit it’s been a while since I picked my own mushrooms or killed for my evening meal!

Khomich said that over millions of years the human visual system adapted for forecasting natural processes.  He argues that as modern markets have existed for no more than 100 years, and are an artificial process. Therefore, it is a fallacy to believe that we can easily find market trends visually, when in fact they are often absent despite our supposed recognition skills. And that’s why there are more failed trades than successful ones.

Ugg….I’m just glad I don’t rely on chart pattern recognition to make a trade!

May today be a profitable day…for all of us.

John