At Theta, we have a 2 steps process when performing an analysis.
Step 1
In the first step, we take a look at the macro economics conditions. In order to do this effectively, we do extended research on monetary history of the world over the last hundreds or more years. By understanding history, understanding what has happened under which conditions, understanding market cycles and what drives them, we can have a better picture of where we currently are.
There have been many instances where something extraordinary happened in the financial markets, leaving the participants totally stunned and unprepared. Many would say things such as “it has never happened before!”. However, most of the things we see in the market that we find unusual, has happened in the past one way or another. As complex as the market are, it is driven by human actions and emotions, which has not changed much over the recorded history. We still act in herds, still loss averse and still greedy and illogical just like our ancestors hundreds and even thousands ears ago. Over leveraged bubbles and subsequent crashes, business and debt cycles, deflationary depressions and inflation led by over printing of currency, all of that has happened many times in the past. Therefore, by deeply understanding financial history, we believe that one can have a general picture of where we are and how we will progress.
After our extended review of history, we analyze the current environment, the policy makers actions and their plans, and what economic conditions we can expect as a result of those policies. With the current economic environment of unprecedented policies all over the world, having the most accurate analysis has become increasingly challenging, but perspective of history does give us advantage. Finally, based on the economic conditions that we expect will happen and prevail in the future, we come up with a list of financial assets that will most likely be affected and focus our micro analysis on them.
There is a famous saying by Mark Twain: “History does not repeat itself, but it does rhyme.”
While Theta totally agrees with Mark Twain, we like the following quote better: “History does repeat it self, but in such cunning disguise that we never detect the resemblance until the damage is done”. That is why at Theta, we aim to know and understand history as much as possible so we can best prepare for challenges ahead.
Step 2
In the second step, we use our proprietary technical analysis method to analyze the asset classes chosen in step one. In our experience, traditional technical analysis techniques such as moving averages, RSI oscillators, Fibonacci extensions and different types of trend lines while have worked very well in the past, are now rapidly losing their edge.
We suspect the reason is because with information widely available as it is today, more and more investors and researches started using those traditional techniques and front running others, making the techniques less and less effective.
After all, there is only a limited number of opportunities in the market., and if every investor look at the market in the same way at the same time and try to grab the same limited number of profitable trades, the likelihood of success will decrease drastically. With the rise of retail traders and automated trading systems, traditional technical analysis has become as least reliable as it has ever been.
At Theta, we have developed a proprietary technique that looks at not just price action, but price action in its relationship with its moving average and other oscillators. We have found that this technique help us reduce the commonly seen noise and fake outs in the normal price action, making the analysis a lot more dependable and reliable. In addition, we continually develop the method to adapt to rapidly changing financial environment.
Combining two steps above, Theta has come up with an analysis method that we believe has brought us the edge in the markets over the years. While we do not provide investment advice, we hope that our work can give subscribers the advantage of having a clearer and more concise view when dealing with market complexity, and then make the decision that can best suit their needs.