I doubt from your reply you understand anything of what I said. Think about why cointegration of volatility is the only reason professional vol traders survive. Then you perhaps start to understand why I used the term in conjunction with price inertia and why TA traders' life saver (generally it does not save lives) is the occasional strong momentum that continues even after TA folks received their much delayed "signal".
++++++++++++++++Attention Attention+++++++++++++++ A huge "W formation" established itself in AUDUSD on the daily chart series, this obviously means we will target 0.78 levels very soon. Can't go wrong with this, I heard those kind of formations are the bread and butter of Technical Anal-ysis disciples.
In practice, technical analysis is a way to find high-probability setups in reaction to the market -- trading setups that factor in potential price barriers such as supply, demand and market mechanics and that give the trader cues about the market move with the highest likelihood. Charts can't help a trader predict a stock's exact day-to-day price movement for the next five years.
As I read it: "But I let you in on a secret: There is a concept called momentum.." I assume you're being mildly sarcastic in calling it a 'secret'. I also assume that you're alluding to the heavily-researched market anomaly often referrred to as the 'momentum effect'. "..called momentum or more scientifically "cointegration"" This is where I believe your words are implying that cointegration is a more formal or precise term for momentum. Cointegration is a statistical term rather than a scientific one (that's a minor quibble, though) but the use of momentum and cointegration in trading strategies are pursuing diametrically opposite objectives, i.e. momentum and mean reversion. What have I failed to read properly or misunderstood from that part of your post?
a) I was highly sarcastic, it is not a secret for obvious reasons... b) mean-reversion has nothing to do with co integration. At times when the error term in regression statistics is stationary then time series variables are said to be cointegrated. Strong trends can exhibit very high cointegration properties and often in fact do. Picture two time series that move upwards in unison. The differencing series exhibits very strong cointegration properties. My point overall was that only when trends are strong enough and persistent enough will those that capture trends (albeit delayed) via technical analysis be able to capture profits. And that often happens when the actual price time series and the time series of the inputs that drive the price series are highly cointegrated.
Ditto. It's much more useful to discuss about a specific trading strategy, analysis of a firm's performance or comparison of different platforms and prop firms.