Chapter 4. Identifying Trends

Highly Efficient Markets

Today’s markets are fundamentally different from those of just a few years ago. One of the most important changes has been the explosive growth in algorithmic trading that has been driven by the availability of cost-effective supercomputing and very high-speed communication links between systems. Brokers and large hedge funds exploit these advances to gain an advantage in the marketplace that is not available to the average investor.

Private investors almost always underestimate the impact of the growing gap between their capabilities and those of large institutions. The misconception is destructive when it causes them to rely on technical charting methods that might have worked well as ...

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