Sunday, August 5, 2012

Chart Analysis

I used to trade speculatively in the online financial markets. One of the tools I used to determine which positions to take is technical analysis. I analyzed chart patterns to see if there be any opportunity to make money.

One of the chart patterns that I look for are congestion and continuation patterns. Here's an example...


Looking at the example image above, congestion/continuation patterns occur when price moves sideways. This usually happens when investors are cashing in on recent gains, trying to get out of a position--in short, accumulation and distribution.

When these price patterns start to narrow, almost always, you can expect a breakout in favor of the prevailing trend... chart moves up, goes sideways for a while, then moves up again.

Oddly, I see the same thing with online poker. Take a look...

My win-rate goes up, moves sideways, then continues moving up again. Click on the image to enlarge


The reason for this, I think, is variance.

During those times when my win-rate is sideways, I am on a dry spell and not getting good hands--or it's villain's birthday. While doing pot control, I am investing on my meta-game.

Almost everyone who regularly plays online poker has poker tracking software. If they are in this for the long term, these regulars invest time analyzing hands, while taking down notes on different players.

Investing in my meta-game means I do plays which will come out on their poker tracking software that I play like a fish. I do this often enough on cheap pots, and some regs will start to think that I am fish. They will start calling light.

For a while, my win-rate chart goes sideways. This is to be expected. Variance favoring villain, and investing on my meta-game costs money. But when the planets line up for me and my investment pays off, the chart starts moving up again.

I can tell if I am not playing optimally, my win-rate moves below the lows of the congestion/continuation pattern. When this happens, either I take a break from poker, or I tighten up my game.

It can get frustrating though, specially if these dry spells lasts for several weeks. To get through these dry spells, I remind myself that this is part of doing business.