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October 1997 marks the 15th anniversary of Technical Analysis of STOCKS & COMMODITIES magazine. For me -- and I'm sure I also speak for our longtime subscribers -- it's been truly remarkable watching the changes that the entire investment arena, the technology and even our publication have undergone since our first issue. Think back! When STOCKS & COMMODITIES was first introduced in 1982, the Apple ][e was the personal computer. Traders were excited about the possibilities, because having an Apple ][e meant that they finally had a graphic interface. Instead of doing all of your calculations in the spreadsheet VisiCalc (and if you don't recognize that name, then you are a lot younger than me!), peering at columns of numbers, the new interface meant you could actually move crosshairs on the screen and see values or even -- hurray! -- draw trendlines. Holy technical analysis, Batman!
Today, of course, 15 years later, for a comparatively smaller amount of money, you can lay your hands on a computer that is lightning-fast, can store information about every trade ever made in the history of the world and even run software that will train itself by using a cascade correlation learning paradigm running 10,000 iterations, utilizing back-propagation with interconnected multiple layered hidden nodes. And of course, you can do this after you have suitably preprocessed the data with genetic algorithms so you have proper randomly mixed pairs of data. But the most exciting part? The computer will then page you while you are at lunch so you can place your orders right then and there, using your cellphone!
Things have changed in the past 15 years, haven't they? All kidding aside, the technological advances have provided individuals -- both professional and nonprofessional -- with the opportunity to research, test theories and design models to trade the markets using every concept imaginable. As a result, technical analysis continues to evolve into more of a science based on replicable results than what its critics would have you believe.
Technical analysis can be redefined into questions and answers, ergo rules with an if-then logical basis. The rules can then be tested, and if you like the results, you have a working model. But most people don't want to go to the trouble of working through these steps, because -- and no one can deny it -- it is a great deal of work. But the work pays off in two very important steps: First, you will be able to ascertain the viability of the model and not waste your money on methods that return poor results. Second -- and this is most important -- you can prove to yourself that your methods are reliable.
The fact is, if your trading signals can do just slightly better than 50% accuracy and if you use prudent money management techniques, you'll be ahead of the game. But the real challenge is in weathering the predictable percentage of losers; that's where the real difficulty of trading lies. It is a rare individual who can deal with the downside, confident that the upside is just around the corner. But you can gain that confidence with enough historical analysis of your model. Every month, STOCKS & COMMODITIES brings to you methods and models for you to incorporate into building your own approach. Some will be appropriate for you, while some won't be. However, if you invest the time in your model development -- an investment in yourself -- the results will be worth every effort. Join us in celebrating our 15th anniversary.
