The Software - Introduction
During the late seventies and early eighties I was the financial director of a group of European subsidiaries of a major American corporation. I was responsible for the management of multi-currency cash-flows and exposures. At first I naively assumed that help would be available : I thought that someone out theremust understand what is going on, techniques for forecasting currency moves must be available. This transpired not to be the case.
The people who understood the markets well enough to make money trading and investing refused to make forecasts : those who were prepared to make forecasts were frequently wrong.
2) Set about studying the markets, which I am still doing. In 1984 I set up as an independant technical analyst, and have been trading, and advising traders and investors, ever since.
Over the years I have studied the available "Technical Analysis" literature, developed and tested computer trading systems, analysed the "Fundamentals", collaborated with fund managers and economists, exchanged ideas with traders, observed (and lived through !) all the major market moves, and concluded that :
Forecasting the financial markets is impossible, but :
Identifying what will probably happen next is easy - yes really ! - example: if a market has moved up strongly over an extended period and is now losing ground in a ragged pattern more slowly than it moved up, the up-move will probably resume once the "weak holders" have been shaken-out.
furthermore : The law of diminishing returns rapidly applies to all market analysis methods. (You could put the 27 of the world's leading experts to work analysing a market, each with unlimited data, software and computing power and either (a) they would be split down the middle or (b) they would all agree, in which case there is a very strong probabilty that they would be wrong - if everyone who is interested in a particular market thinks it is going to go up, then everyone who wants a position in that market already has it, and it can only go down - which is why market-opinion surveys are contrary indicators).
If these conclusions, are accepted then it follows that, to succeed in beating the markets regularly one must :
These conclusions may appear to be obvious (or nonsense, depending on personal experience and temperament). They are certainly counter-intuitive to most investors and contrary to the "work ethic".
Most people instinctively assume that the more work they do, and the more powerful and intelligent are the analytical techniques they apply, the more likely they are to be right. Additionally, as risking significant amounts of capital on a market position is a serious thing to do, it seems natural that a serious amount of analysis should precede the decision. Indeed, many people simply conclude that they would have no chance of competing in the financial markets against organisations with high-powered computers, capital resources, research teams, econometric models, etc. etc.
For those people and organisations who do decide to participate, this line of thought gives rise to a number of potentially destructive dangers :
The question remains : Is it really possible to trade successfully, beating the bid-offer spread and commission expenses on a regular basis, based only on the clues provided by the observation of evolving price-charts and in the full expectation that a significant proportion of positions will result in losses ? In other words, can trading and investing be reduced to a game of skill (like poker or bridge) in which the player takes decisions based on incomplete information but in line with an experience-based knowledge of the probabilities. If it can, then the ability to take money out of the financial markets is conducive to improvement via practice. The "Market Skill-Builder" package is the tool I have developed, over a number of years, initially in order to test this question, and secondly to practise for myself the trading techniques I was developing and which are advocated in this site. The market data is real and the trading environment provided by the package realistic.
It should be noted that I make no claims as to the level of proficiency that any user of this package can attain, but if you can regularly make theoretical money trading this program, then your chances of making real money in the financial markets are a lot better than good.
PS: Once a user is accustomed to program operation, the average time taken to trade a complete day of intra-day data, or a year of daily data, is half-an-hour. This means that years of realistic trading experience can be compressed into days - and 'learning-curve' mistakes cost nothing !