Making the case for the trade

摘要

The use of analog analysis in trading is the comparison of charts or sections of charts in an effort to find agreement or similarity so that what transpired on one chart can be used to forecast what will happen on the other chart. It is a trading methodology that attracts attention every few years. Usually, the interest is in the area of chart patterns and seasonal analogs. Developing a seasonal analog for a market is a relatively simple process. It involves taking a snapshot of the same seasonal time window of data and comparing it year to year for a number of years seeking an identifiable seasonal pattern. For example, look at the charts for prices of corn from June of one year to the following June and sort the price action using different patterns that the market traces out over this period. The goal of this exercise is to find similar patterns that are predictive of future price movement. In our analysis of the seasonal analog for corn from June of one year to June of the following year, we might want to attempt to forecast price action in com for the time period from July to November.