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Far From Random: Using Investor Behavior and Trend Analysis to Forecast Market Movement by Richard Lehman

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Chapter 12. Putting It All Together

Buy and hold is dead. It's over. Game, set, match. Trend followers were the only ones who made money in the greatest market melt down since the Great Depression.

Michael Covel

Those who develop trading techniques almost universally note the importance of establishing disciplined rules and parameters. Many quantify the parameters of both the strategy and the execution in extraordinary detail, leaning heavily on their computers for help. At one extreme, trend channel analysis (TCA) may be used in this manner, but the strength of its overall effectiveness lies in its ability to provide even casual investors with a perspective on the market that does not emanate from the media, a broker, or a knowit- all neighbor. The reason TCA is able to do this is that, at its core, it is a simple premise to understand.

The notion of human behavior and psychology as driving forces behind stock prices is sufficiently radical and complex to occupy scholars for many years to come. Indeed, we've only just learned that our behavior actually impacts prices much less the intricacies of how that happens. However, while the academics struggle to find equations that link herding instincts with market bubbles, TCA distills it down for us into usable fashion right now. That does not mean you simply draw a few lines and become wealthy. But it does mean you can see the big picture without a doctoral degree and without complex mathematics. I have been publishing free charts on ...

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