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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits by Michael C. Thomsett

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Spikes and How to Manage Them

One principle of statistics is that within a range of values, notably unusual instances should be removed. These spikes distort the average, whether simple or exponential. For example, in a series of stock ending prices within a trend, if the normal breadth of trading is between $25 and $30 per share, a one-time spike to $50 should not be considered typical.

To consider something a spike, it should be extraordinarily unusual and it must not repeat. It is an aberration in every sense, and in order to maintain accuracy of a statistical analysis, it should not be considered.

However, a spike in a stock trend also presents potential problems that should not be ignored. For example, is the spike truly an aberration, ...

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