Sudoku, from James Sogi

March 26, 2007 |

 This weekend my daughter taught me how to do the Sudoku puzzles that I have seen others doing. They say it is good to keep the brain in good working order and to prevent brain atrophy, and it's fun. It involves a process of elimination, narrowing down the possibilities across different variables in order to have a better chance of recognizing the patterns. It is similar to the SAT aptitude test technique of narrowing choices to one or two, to increase your chances of arriving at the correct answer.

Perhaps such a process of elimination might be fruitful in market analysis, where one does not need to be exactly right all the time, but in order to achieve some level of success one needs to avoid being totally wrong all the time. Eliminate the possibilities that have a poor chance of occurring and it reduces being totally wrong.

The tendency for the news and the public seems to be to assume that whatever trajectory the market is on it will continue on in that direction. After a big bounce and big up, is it likely for the market to continue up forever? After a big drop, like earlier in March, will the market, as the news seems to assume, continue down forever? What scenarios might we want to eliminate from consideration?

Let's say the market is caught in a tight range for days on end after a move. The process of elimination might make pattern selection a bit less error prone. And though it might not make you right all the time, at least you might not be wrong all the time, which is a start. If you are at least not going in the completely wrong direction, that is about 68 percent of the battle.





Speak your mind


Resources & Links