Dancing with the Trend

Dollar Cost Averaging

by Greg Morris

Dollar cost averaging is simply the act of making like dollar investments on a periodic basis, say every month or every quarter.  It is sold as a technique because they want you to believe that no one can outperform the market.  There are many papers written on this subject and I don’t want to dwell on it.  Dollar cost averaging is very dependent upon when you start the process.  If you start the process at the top of the market, just prior to a large bear market, you will be buying all the way down and this process could last a couple of years.  Your average Read More 

Dancing with the Trend

The Enemy in the Mirror

by Greg Morris

I am a retired money manager and want to share some thoughts on that profession and investors in general.  Portfolio management is as much about managing emotions as it is about correlations, standard deviations and Sharpe ratios.  Over the decades much has been written about the “math” of portfolio management but the emotional aspect of the investment decision making process does not receive nearly the attention or research.  However, Behavioral Finance is a relatively new field that seeks to combine behavioral and cognitive psychology theory with conventional economics and Read More 

Dancing with the Trend

Reliability of Pattern Recognition

by Greg Morris

I developed this method primarily for candle pattern identification when I wrote my book, Candlestick Charting Explained (the book was first published in 1992 and now is in its third edition).  The reliability concept equally applies to any type of pattern, including the many chart patterns widely used in technical analysis.  My argument and complaint about most technical analysts, is that for a reversal or continuation pattern to be identified, you MUST first identify the trend.  How can you have a reversal pattern if you do not know what the trend is?  What is it Read More 

Dancing with the Trend

Pair Analysis - 4

by Greg Morris

This will wrap up the Pair Analysis series.  In this article I will show: Some basic statistics on the pairs I used in the analysis. The top 50 pairs based on performance. The bottom 50 pairs based on performance. The Sharpe Ratio is a measure of return and risk, with risk being standard deviation.  If you have read much of what I write, I think standard deviation is a inadequate measure for risk because it assumes random and normalized data, of which, most stock market data is not.  The modified Sharpe is an attempt to make a slight improvement.  I have no opinion Read More