Editing 2101: Technical Analysis
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==Explanation== | ==Explanation== | ||
+ | {{incomplete| Comic is still undergoing TECHNICAL ANALYSIS (this is just the prologue). Do NOT delete this tag too soon.}} | ||
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There are two recognized methods to attempt to predict the stock market, each with its own pros and cons: | There are two recognized methods to attempt to predict the stock market, each with its own pros and cons: | ||
*{{w|Technical analysis}} is more appropriate for traders seeking to benefit off short-term fluctuations in stock prices, by attempting to look for trends, momentum, patterns etc. in the stock prices. | *{{w|Technical analysis}} is more appropriate for traders seeking to benefit off short-term fluctuations in stock prices, by attempting to look for trends, momentum, patterns etc. in the stock prices. | ||
− | *{{w|Fundamental analysis}} is more appropriate for investors seeking to benefit off long-term fluctuations in stock prices, by attempting to guess future earnings based on some fundamental factor about the | + | *{{w|Fundamental analysis}} is more appropriate for investors seeking to benefit off long-term fluctuations in stock prices, by attempting to guess future earnings based on some fundamental factor about the stock. Investors can choose to look for high alpha, low beta, good Price/earnings ratio or other indications that a stock may be a solid investment. |
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− | The theoretical value of a stock | + | The theoretical value of a stock is the sum of all its future earnings, with earnings in the future discounted appropriately to account for the {{w|time value of money}}. Because these earnings are never fully predictable, traders may have different ideas about the true value of a stock, and buy the stock if they believe the currently offered prices are particularly low, or sell it when the prices are high. |
Technical analysis, however, does not even attempt to understand the earnings of the stock, instead focusing on the shapes and patterns that result from traders making their moves. While there is a human behavioral component to stock trading, it is not clear that one can extract much information from the shapes of stock charts. To the extent it does work, a substantial part of its success may be simply an artifact of the herd behavior of traders who engage in technical analysis, a zero-sum game. | Technical analysis, however, does not even attempt to understand the earnings of the stock, instead focusing on the shapes and patterns that result from traders making their moves. While there is a human behavioral component to stock trading, it is not clear that one can extract much information from the shapes of stock charts. To the extent it does work, a substantial part of its success may be simply an artifact of the herd behavior of traders who engage in technical analysis, a zero-sum game. | ||
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The comic displays a {{w|Candlestick chart|stock price chart}}, annotated with labels which purport to be technical analysis. These labels are nonsense from the perspective of technical analysis, but do accurately describe the graph itself: "{{w|allegro}}" (a musical term used to set the tempo at the beginning of a score), "{{w|prologue}}" (an introductory section of a play, book, or similar), "{{w|lumbar}} support" (the thing in a chair shaped to better support your back), "bathtub" (possibly a reference to the so-called "{{w|Bathtub curve}}"), "{{w|uptalk}}" (a speech pattern). One label celebrates that "these two points define a line! Promising signal." (In geometry, any two points define a line.) | The comic displays a {{w|Candlestick chart|stock price chart}}, annotated with labels which purport to be technical analysis. These labels are nonsense from the perspective of technical analysis, but do accurately describe the graph itself: "{{w|allegro}}" (a musical term used to set the tempo at the beginning of a score), "{{w|prologue}}" (an introductory section of a play, book, or similar), "{{w|lumbar}} support" (the thing in a chair shaped to better support your back), "bathtub" (possibly a reference to the so-called "{{w|Bathtub curve}}"), "{{w|uptalk}}" (a speech pattern). One label celebrates that "these two points define a line! Promising signal." (In geometry, any two points define a line.) | ||
− | The shape of the chart is similar to the exponential behavior of cryptocurrencies when they are successful, where price (positional height on the chart) roughly increases while volatility (height of the bars or candles themselves, and of the peaks and troughs, on the chart) does the same. Technical analysis used to be an esoteric domain held by well-paid stock analysts, but as cryptocurrency has spread | + | The shape of the chart is similar to the exponential behavior of cryptocurrencies when they are successful, where price (positional height on the chart) roughly increases while volatility (height of the bars or candles themselves, and of the peaks and troughs, on the chart) does the same. Technical analysis used to be an esoteric domain held by well-paid stock analysts, but as cryptocurrency has spread and taken down the many barriers to engaging in investment trading, people from all walks of life have begun staring at charts like this. |
{| class="wikitable" | {| class="wikitable" | ||
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|{{w|Lumbar}} Support | |{{w|Lumbar}} Support | ||
− | |A cushion or other device that provides support to the lower part of the ''spine'', a play on the preceding ''spline'' | + | |A cushion or other device that provides support to the lower part of the ''spine'', a play on the preceding ''spline'' |
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|Renewal | |Renewal | ||
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|Yikes | |Yikes | ||
− | |This section of the chart refers to the actual use of a candlestick chart, which is to document the difference between the opening and closing value of a stock. A long red bar shows that a stock closed at a much lower value than it opened at, which would be disastrous for someone trading that stock. | + | |This section of the chart refers to the actual use of a candlestick chart, which is to document the difference between the opening and closing value of a stock. A long red bar shows that a stock closed at a much lower value than it opened at, which would be disastrous for someone trading that stock. |
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|Wrong! | |Wrong! | ||
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|If I add some lines here I can convince myself I'm doing something more than just seeing patterns in the graph of a random walk | |If I add some lines here I can convince myself I'm doing something more than just seeing patterns in the graph of a random walk | ||
|A {{w|random walk}} is a mathematical object that describes a path that consists of a succession of random steps. Randall is trying to convince himself that the patterns in the stock chart are more meaningful than just random data. The {{w|Random walk hypothesis|random walk hypothesis}} is a financial theory that states that stock prices evolve according to a random walk, thus short-term price changes are random and cannot be predicted from past history. | |A {{w|random walk}} is a mathematical object that describes a path that consists of a succession of random steps. Randall is trying to convince himself that the patterns in the stock chart are more meaningful than just random data. The {{w|Random walk hypothesis|random walk hypothesis}} is a financial theory that states that stock prices evolve according to a random walk, thus short-term price changes are random and cannot be predicted from past history. | ||
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|Slope! | |Slope! | ||
|The {{w|slope}} of a graph is the ratio of the "vertical change" to the "horizontal change". A measure of slope on a financial chart can be used to predict possible specific returns or losses, or to analyze those from the past, but Randall simply prints the word in his chart annotation, with an exclamation point possibly indicating how exciting its value is, rather than labeling the actual numeric slope. This could also be a play on a second meaning of slope, meaning a rising or falling surface in general. | |The {{w|slope}} of a graph is the ratio of the "vertical change" to the "horizontal change". A measure of slope on a financial chart can be used to predict possible specific returns or losses, or to analyze those from the past, but Randall simply prints the word in his chart annotation, with an exclamation point possibly indicating how exciting its value is, rather than labeling the actual numeric slope. This could also be a play on a second meaning of slope, meaning a rising or falling surface in general. | ||
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− | |Could be an omen | + | |Could be an omen |
|This again makes reference to the financial meaning of the candlestick chart. The top of the small grey tick represents the highest value that the stock sold at over that day. The joke is that even though the stock did not grow appreciably, and actually sold at some point in the day for much lower, that it "could be an omen" that the value was rising. | |This again makes reference to the financial meaning of the candlestick chart. The top of the small grey tick represents the highest value that the stock sold at over that day. The joke is that even though the stock did not grow appreciably, and actually sold at some point in the day for much lower, that it "could be an omen" that the value was rising. | ||
|- | |- | ||
|Red + Green = Christmas | |Red + Green = Christmas | ||
− | |Red and green are traditional colors for the {{w|Christmas}} holiday in the U.S | + | |Red and green are traditional colors for the {{w|Christmas}} holiday in the U.S. |
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|Likely to continue forever | |Likely to continue forever | ||
− | |This is a mistaken opinion often held by buyers in a rising market. It's been rising so much, surely it's the best time to buy! We could make millions! Such times are generally followed by a sharp downturn resulting in significant losses, as can be seen historically farther back on the chart. Cryptocurrency communities have significant members who call themselves " | + | |This is a mistaken opinion often held by buyers in a rising market. It's been rising so much, surely it's the best time to buy! We could make millions! Such times are generally followed by a sharp downturn resulting in significant losses, as can be seen historically farther back on the chart. Cryptocurrency communities have significant members who call themselves "hodlers" -- these people always trust that the price will eventually go up even higher, because it has recovered so many times in the past. |
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==Transcript== | ==Transcript== | ||
+ | {{incomplete transcript|Do NOT delete this tag too soon.}} | ||
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:[A series of red and green box-and-whisker plots form a line that starts in the bottom left corner of the image and wiggles up to the top right corner, with a series of peaks and troughs that resemble a typical stock market diagram. The diagram is annotated with lines, arrows and text.] | :[A series of red and green box-and-whisker plots form a line that starts in the bottom left corner of the image and wiggles up to the top right corner, with a series of peaks and troughs that resemble a typical stock market diagram. The diagram is annotated with lines, arrows and text.] | ||
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[[Category:Music]] <!-- “allego” and “prologue” --> | [[Category:Music]] <!-- “allego” and “prologue” --> | ||
[[Category:Comics featuring real people]] <!-- Title text: James Tobin--> | [[Category:Comics featuring real people]] <!-- Title text: James Tobin--> | ||
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