Before clicking on that tempting green “Analyse now” button,you should understand how to get the best analysis possible out of Sentient Trader.
First of all it is important to understand that Sentient Trader performs its phasing analysis by using a pattern recognition approach. This approach mimics the way in which humans recognise patterns on the chart. It is worth spending a moment thinking about how you do this – if you half-close your eyes and look at a chart, you will see patterns because of the overall shape, and in particular, the extremes in the price movement. If you are specifically looking for “cycle” patterns, you will identify cycles by their troughs and peaks.
Now look at the left hand edge of the picture above. That looks like a trough, doesn’t it? A blue arrow has been drawn from that trough, which emphasises that. But what if I was to tell you that price keeps moving down if you move further to the left, and that it formed a prominent trough a few bars earlier? Clearly we would have been mistaken in identifying the visible point as a trough. As another example, try covering part of a chart that you are looking at, so that an obvious trough is concealed. Without the visual evidence of that trough you would probably be tempted to label another, smaller but visible trough as the trough of a cycle.
I am illustrating a very important point about how we humans (and Sentient Trader), recognise patterns – we work with the data we are presented with, and tend to jump to conclusions. You might ask why I didn’t prevent Sentient Trader from “jumping to conclusions”. The reason is that this process is an important part of successful pattern recognition … but there isn’t space to discuss that here.
What does this mean to you when using Sentient Trader? Simply this: the choice you make in terms of how much data to “show” to Sentient Trader has a critical impact on the analysis that Sentient Trader performs. How do you choose “how much data to show” to Sentient Trader? You set the Analysis Period. This simple action makes a big difference to Sentient Trader’s performance.
To decide what Analysis Period to set look at the chart you have loaded, bearing in mind the dangers of identifying a trough too close to the left, identify a trough that is clearly prominent because of price movement – in other words identify a trough that is preceded by a cyclical up then down move of a duration proportional to the total amount of data you have. I would recommend that the move you identify is at least 1/10th to 1/6th of the total data. If you are analysing 20 years worth of data for example, a “proportional” move would be anything from 2 years to 3 & 1/2 years.
How does this inform the analysis period? Simple – make the start of the analysis period shortly after the peak which precedes the trough you have identified. This will ensure that this will be the first important trough identified by Sentient Trader.
Now all you need to do is set the analysis period. Simply click on the Analysis Period button in the toolbar.
You will see two buttons – with a start and end date. Because we want Sentient Trader to analyse up until the last bar of data, we will leave the end date as it is. Click on the left hand button, with the start date.
And either type in the bar number, or use the calendar to select the date:
If Sentient Trader has already analysed the chart, it will immediately restart the analysis. If you stopped it previously then now, finally you can click on that green button!
First of all it is important to understand that Sentient Trader performs its phasing analysis by using a pattern recognition approach. This approach mimics the way in which humans recognise patterns on the chart. It is worth spending a moment thinking about how you do this – if you half-close your eyes and look at a chart, you will see patterns because of the overall shape, and in particular, the extremes in the price movement. If you are specifically looking for “cycle” patterns, you will identify cycles by their troughs and peaks.
Now look at the left hand edge of the picture above. That looks like a trough, doesn’t it? A blue arrow has been drawn from that trough, which emphasises that. But what if I was to tell you that price keeps moving down if you move further to the left, and that it formed a prominent trough a few bars earlier? Clearly we would have been mistaken in identifying the visible point as a trough. As another example, try covering part of a chart that you are looking at, so that an obvious trough is concealed. Without the visual evidence of that trough you would probably be tempted to label another, smaller but visible trough as the trough of a cycle.
I am illustrating a very important point about how we humans (and Sentient Trader), recognise patterns – we work with the data we are presented with, and tend to jump to conclusions. You might ask why I didn’t prevent Sentient Trader from “jumping to conclusions”. The reason is that this process is an important part of successful pattern recognition … but there isn’t space to discuss that here.
What does this mean to you when using Sentient Trader? Simply this: the choice you make in terms of how much data to “show” to Sentient Trader has a critical impact on the analysis that Sentient Trader performs. How do you choose “how much data to show” to Sentient Trader? You set the Analysis Period. This simple action makes a big difference to Sentient Trader’s performance.
To decide what Analysis Period to set look at the chart you have loaded, bearing in mind the dangers of identifying a trough too close to the left, identify a trough that is clearly prominent because of price movement – in other words identify a trough that is preceded by a cyclical up then down move of a duration proportional to the total amount of data you have. I would recommend that the move you identify is at least 1/10th to 1/6th of the total data. If you are analysing 20 years worth of data for example, a “proportional” move would be anything from 2 years to 3 & 1/2 years.
How does this inform the analysis period? Simple – make the start of the analysis period shortly after the peak which precedes the trough you have identified. This will ensure that this will be the first important trough identified by Sentient Trader.
Now all you need to do is set the analysis period. Simply click on the Analysis Period button in the toolbar.
You will see two buttons – with a start and end date. Because we want Sentient Trader to analyse up until the last bar of data, we will leave the end date as it is. Click on the left hand button, with the start date.
And either type in the bar number, or use the calendar to select the date:
If Sentient Trader has already analysed the chart, it will immediately restart the analysis. If you stopped it previously then now, finally you can click on that green button!
Sam Medwin
Comments