Charts Without Illusions · Lesson 4 of 5
What Actually Has Evidence
Skepticism that never resolves into knowledge is just a pose. Some price behaviours are real, documented, and worth knowing.
After three lessons of demolition, the honest inventory — the price-derived effects with genuine academic literature behind them:
Momentum / trend persistence. The most documented anomaly in finance: assets that have recently performed well continue, on average, to perform slightly well over following weeks and months — measured across stocks, bonds, commodities and currencies, in over a century of data. Whole quant firms exist on it. The catches: the edge is modest, arrives with brutal occasional reversals (momentum "crashes"), and after costs is far harder to harvest at retail than a backtest implies. Trend-following is not folklore — it is a thin, real, uncomfortable edge.
Volatility clustering. Rock-solid: volatile periods follow volatile periods, calm follows calm. Tomorrow's size of movement is genuinely predictable from recent movement — its direction is not. This asymmetry is why our system's engines measure volatility states, and why "when to trade" is a more answerable question than "which way".
Session structure. FX liquidity follows the sun: London and New York bring depth and movement; their overlap concentrates it; rollover hours thin out and behave badly. Documented, persistent (it is driven by institutional office hours, which do not arbitrage away), and more useful than any pattern: it tells you when your costs are lowest and your stops most respected.
The crowd levels from lesson three — real via coordination, modest in size.
And the balancing truth: markets are mostly efficient. Decades of easily-harvested chart profits is not a plausible state of the world — every effect above is thin precisely because people compete it thin. The realistic ambition is not a secret signal but a small, persistent tilt, harvested with the cost discipline and honest testing this site's other courses teach.
Map our machine onto the inventory: it trades trend-alignment across engines (momentum), gates on volatility state (clustering), enters only in the London morning (session structure), and never touches a subjective level. The design is, quite literally, this lesson's list with rules wrapped around it — and its record is public so you can watch whether the thin edges are thick enough.