What do you do if you encounter logical fallacies in technical analysis?

The statement identifies the logical fallacy known as "post hoc ergo propter hoc," which assumes that because two events occur in sequence, the first event must be the cause of the second. In the context of technical analysis, this fallacy might lead to attributing a market move solely to a specific indicator without considering other influencing factors. To address this fallacy, it suggests questioning causality and seeking multiple confirming signals before drawing conclusions.

En el análisis técnico, como en cualquier otro campo, es importante reconocer y abordar las falacias lógicas de manera crítica. Podria mencionar algunos pasos que se puede seguir si encontramos falacias lógicas en un análisis técnico: Identificación: Reconoce la falacia lógica presente en el análisis técnico. Evaluación: Determina cómo afecta la validez del análisis. Corrección: Corrige o mitiga el impacto de la falacia identificada. Comunicación y documentación: Informa a tu equipo y documenta cualquier ajuste realizado. Refinamiento: Revisa y mejora el análisis técnico una vez corregida la falacia. Aprendizaje: Utiliza la experiencia para mejorar tus habilidades de análisis crítico.

As a trader, I've had to stay vigilant against biases like the sunk cost fallacy or confirmation bias. Adopting a neutral standpoint, regardless of my preconceptions, has been critical. It's a skill developed over time, requiring constant self-awareness and discipline to recognise when psychological biases may cloud my judgment and realign my analysis accordingly. This neutral stance helps make more objective, data-driven decisions in the market.

The statement advises traders to question their assumptions, particularly when they lead to logical fallacies. It highlights the confirmation bias, where individuals favor information that confirms existing beliefs while disregarding contradictory evidence. In the context of technical analysis, this bias may lead to overvaluing patterns that align with one's narrative while neglecting critical data that contradicts it. To mitigate the confirmation bias, traders should actively seek out information that challenges their perspectives, promoting a more balanced and informed decision-making process.

En los procesos de análisis de información, en donde se manejan metodologías técnicas para medición, proyección, prospección, predicción, entre otras, al encontrarse con “falacias”, se debe evaluar qué insumos en general se utilizaron, tales como los datos, modelos, métricas…, que permitan determinar, en donde se pudo presentar alguna desviación que llevara al resultado, para con esto poder identificar si el resultado, es consistente a lo planteado, en ese orden, se corrige y de vuelve a correr el proceso, en caso que no sea así, por muy incoherente que pueda ser el resultado, se debe analizar, para encontrar alguna utilidad de lo que se tiene, porque en el fondo algo debe indicarnos, este resultado.

The statement emphasizes the importance of consistency in avoiding logical fallacies, particularly the Texas sharpshooter fallacy. This fallacy occurs when one selectively focuses on a cluster of data points to find a pattern while disregarding the larger data set. In the context of technical analysis, this could involve cherry-picking chart timeframes or data sets that support a desired outcome. To mitigate the risk of this fallacy skewing conclusions, traders should apply analysis methods consistently across all data and timeframes, ensuring a comprehensive and objective assessment of market trends.

The statement advocates for using logic checks to safeguard against logical fallacies in analysis. It suggests subjecting hypotheses, such as predicting market behavior based on patterns, to testing across various scenarios. The gambler's fallacy, where past events are erroneously believed to influence future outcomes in independent trials, is highlighted as a common pitfall. For instance, assuming a stock will rise on the sixth day because it fell for five consecutive days. By employing techniques like backtesting and other logic checks, analysts can verify the validity of their assumptions and enhance the robustness of their analyses.