Trading Fuzzy Patterns by Marge Sherald
Here’s how you can apply fuzzy logic and increase your
Ask around and you’ll discover that every trader has a chart pattern he or she swears by, one that will indicate what the next big move in the market will be. But ask those traders to precisely define their patterns, and you’ll find that although each pattern looks similar, they do not exactly match any set definition. This makes pattern recognition an ambiguous or “fuzzy” task, which may be why fuzzy logic is beginning to be used by traders to recognize chart patterns.
Fuzzy logic is not some new, theoretical idea that has yet to catch on. It’s been around for a while; in fact, by 1990 the Japanese had more than 100 real fuzzy control applications and products in use. The Japanese city of Sendai has controlled its subway with fuzzy logic since 1988. General Motors’ highly successful automobile model, the Saturn, applies fuzzy logic for automatic transmission shift control, as does Volkswagen’s new Beetle. Duke University engineers have shown that intentionally imprecise rules of thinking can help hotel computers sell the right room to the right customer at the right time, thus boosting income. There is even talk of using fuzzy logic on income taxes.