Stationary and non_stationary data.

[Grey1]

Get your self a coin and toss .. For every head plot a dot above the previous.. Keep on this process for 100 times and you get yourself a chart.. lets cal this a COIN CHART

Can you see any H&S , Double Bottom on the coin chart ,...Plot RSI , Plot the Bollinger band and do all kind of Technical analysis on it ..

Lets move on , Now plot the chart of a stock you wish ...


What is the main difference between these two charts ?

It is important to understand this concept .. elementary , but never the less important ..


PS:- just thought to contribute some thing before going out..

 

[Grey1]

The data in the COIN chart is of stationary type as it carries zero information .. it is pure random .. The stock chart is of non stationary type and is like human speech ,, it carries information ..

We as a trader try to analyse the information hidden in the non stationary data type..