John Bollinger states it: "A cardinal rule for the successful use of technical analysis requires avoiding multicollinearity amid indicators. Multicollinearity is simply the multiple counting of the same information. The use of four different indicators all derived from the same series of closing prices to confirm each other is a perfect example."
This is a problem we all have faced at some point of time, when started out with Technical Analysis, actually it’s the problem of PLENTY! With a plethora of indicators available the choice is difficult to make and what adds more to it that most of us get hooked to the indicators without really understanding its underlying constituents and functioning. One can read a very nice writeup on multicollinearity!
1 comment:
Wow you do read between the lines.
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