According to the World Meteorological Organization's International Cloud Atlas, more than 100 types of clouds exist. The many variations, however, can be grouped into one of 10 basic types depending on their general shape and height in the sky.

When I finish this web series, I am going to write a book on all the different types of clouds and their formations. I am going to state the probabilities of the weather based on the cloud formations that can be seen at different times of the day. I am going to sell this book to new farmers. They can use it to plan the efficient use of their irrigation system, field usage, herding, animal welfare etc. For example, if they see Altocumulus clouds in the morning during summer, I will state that thunderstorms are a possibility later in the day (so you don’t need to irrigate!), but they may also be signaling the onset of cooler temperatures so perhaps put off your crop planting until next week.

Would a farmer rely solely on my book of clouds to run their farm? Of course not! We know that weather plays an important role for all farmers, but would a farmer hang his hat on a book that was called the Technical Analysis of Clouds? Not a chance!

So, let’s look to back to that Jesse Livermore quote from a different perspective

“Patterns repeat, because human nature hasn’t changed for thousands of years”

Weather is fractal. Human made decisions are also fractal. It is the collective decisions of thousands of traders that move the market. An algorithmic driven decision or an individual human one has one thing in common. It is fractal in nature.

Bulkowski’s The Pattern Site
“Thomas Bulkowski is an internationally known author and trader with 35+ years of market experience and regarded as a leading expert on chart patterns.”

Thomas has many books on chart patterns, but you have probably never heard of him. He has written 9 (potentially more) books on chart patterns and they all have 4 to 5-star ratings. This is not based on many reviews mind you, but they are all stellar. So why then is Thomas Bulkowski not a household name? Why isn’t he championed as the master trader amongst all other traders? Why has he not amassed a fortune bigger then Bill Gates and Warren Buffet combined? I guess I will let you decide that. Is it because technical analysis doesn’t work or is it because it only works sometimes? You can always make money sometimes.

Evidence-Based Technical Analysis

If you have read this far and haven't felt the need to throw yourself out of a window, I have some bonus content for you. There is an excellent book out there that is probably once of the finest books I have read with respect to technical analysis (evidence based!) and the markets. You might be wondering why I have kept this until the very end. The answer is quite simple.

Not every trader will read this far. Why? Because they don't want to be told technical analysis doesn't work...

Click the book to get the bonus content and a review of this most excellent book.

Part III - Index

Part III - Writing Is In The Clouds


CFTC Rules 4.41 -  / It should be assumed that these results are hypothetical and simulated. Hypothetical or Simulated performance results have certain limitations, unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

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