SURFERS RIDE ON COMPUTER RATIOS
A message to the harassed foreign exchange dealer: let the computer take the strain.
When psychological and political pressures send markets into a spin, the computer can add a calming influence through its absence both of emotion and procrastination. It trades with the same cool objectivity, irrespective of whether it is sitting on a fortune or adding to a string of losses.
The approach is simple. It will provide a humble mathematical analysis of the markets, and will not attempt to make any forecast. It will not try to catch tops or bottoms but will deliberately miss both to concentrate on following the trend. Instead of taking profits quickly and delaying the recognition of losses, the computer recommends taking a loss quickly but letting a profit run.
A mathematical analysis of the market is based on the observation that fluctuations in currency rates display the same pattern as the sea: a succession of small waves is inevitably followed by a big one. The scale of the waves, small or large, varies according to the time horizon. The pattern, however, is consistent: it can be observed intra-day or over a number of months or years.