By John Rekanthler, president of online advice, Morningstar Inc.
July 18, 2002: 12:34 PM EDT
Oh, those charts! Many investors hold a supernatural faith in the wisdom imparted by squiggles and jiggles, as if a stock were struggling to tell a story via semaphore. Close your eyes. Forget about 90-day moving averages, breakout moves and the like. They don't work. Or more accurately, they do work -- 50 percent of the time. The other 50 percent, the stock heads in the opposite direction from what the charts predicted, which is just what you would expect from a random event.
Where to start with the Morningstar author's advice?
- Babe Ruth taught the 50% accuracy fallacy.
- Trend Following can't work? Ed Seykota must not be real.
- Trend Following is not prediction or chart gazing.
Feel free to forward us other interesting news bits that show ignorance and assist in teaching trend following. It's all about education.
Note: The TurtleTrader site will continue to offer a well-rounded slate of positive reinforcement articles along with critique articles. The combination of the two styles helps the learning process. MORE.
