Share
clock Created with Sketch. 08/10/14
09:35
Share
Originally posted by sivart
↑
Now I get how this chart works and thus what the problem is. The blue and red lines will significantly conserverge at the current point in time IF the price is currently going up and will converge and even cross IF the price is currently going down. The problem is however that as time goes by the past values of the blue and red lines move up and down based upon the current price. In essence then the current price rewrites the history of the chart. Since this is the case, IF the price continues downward even more the chart up to and including today will look different than it now does and IF the price continues down less or moves up then the chart up to and including today will look different than it now does. The chart therefore doesn't even present an accurate picture of history, but instead present one possible version of history, which will change based on what happens tomorrow. It's therefore a pretty visual but a meaningless chart apart from over dramatising times when a share has been in a recent upswing that hasn't yet ended or a recent downswing that hasn't yet ended. The bigger the up or downswing the more dramatic the chart makes things look.
Expand
That is why it is far more rewarding to read it as it is happening, whilst its happening. Therefore that will allow one to take action such as to sell or reduce one's exposure or to possibly hedge against a turn.
