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Analyzing a sequence of events to constantly keep us at the starting point
Tuesday, December 6, 2005

In order to uncover "Pseudorandom" you have to know where the sequence began (the starting point). I talked about this on this past weekends update. The only way to get validation "Pseudorandom" even exists, you would have to prove that price action within any financial market isn't random at all.

That technical analysis in general isn't like plotting numbers on a grid from something as random as throwing dice or playing the lottery and expecting consistent results.

But actually can be plotted on a grid through price action in the form of bars or candles to create what we call "patterns." These patterns are created by the change of what investors "feel something is worth" on a day to day basis. The more rare the pattern the more violent price action could move (violence in price action comes in the form of rapid movement up or down).

Whether these are "orchestrated events" created by very sophisticated software programs or just "rapid price movement" that comes in the form of "group think" it should show up on every time frame that you are monitoring for the very validation you seek to prove that it even exists.

We call those "fractals"--Fractals are geometric shapes that are very complex and infinitely detailed. You can zoom in on a section and it will have just as much detail as the whole fractal. They are recursively defined and small sections of them are similar to large ones. One way to think of fractals for a function f(x) is to consider x, f(x), f(f(x)), f(f(f(x))), f(f(f(f(x)))), etc. Fractals are related to chaos because they are complex systems that have definite properties.

Patterns, trends and waves are all forms of analyzing a sequence of events to constantly keep us at the starting point ie: (knowing where it originated). The belief is if we know where it started we will know where it ends. The reason we want to know that before it happens is so we can capitalize on it or at the very least get out of the way and not be fleeced by it.

The "violation of basic rules" or the "validation of basic signals" are proactive ways of alerting us that the sequence starting point has changed.

1. Overlapping
2. Bullish and Bearish Reversals
3. Structures of the wave

We seek validation that the sequence we are watching is the starting point so our minds can bet on tomorrow. ie: (play the game)


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