In Part 1 of the Hoax of Modern Finance, we discussed the age of economic analysis and how the modern world of economics has grown beyond the simple forecasting of supply and demand. In this second installment of the hoax of modern finance, let’s explore the terminology and indicators used in the analysis, and the vast amount of noise out there that can make it difficult to truly understand and make rational decisions.
Let us begin by looking at the terminology used in modern finance. From day trading to derivatives, terms like these get thrown about all the time yet often with little insight into what they actually mean. Many of these terms are simply buzzwords used because they sound impressive. Sadly, this isn’t just the case with newbie traders and day-theme park operators, but even experienced financial professionals use this language without any real understanding.
The technical indicators many traders use today are even more misleading. While these indicators are often very useful in showing patterns and trends in the market, they are also often misinterpreted. Many traders rely on these technical indicators excessively and fail to take into account fundamental information which can drastically affect the accuracy of the indicator.
The sheer complexity of modern finance can also lead to a vast amount of noise. With the rise in popularity of the internet and the ease of access to financial information, individuals have access to a variety of sources of finance. It is important to be discerning with the advice you take from these sources as not all advice is created equal.
Modern finance can be an incredibly complex industry and noisy at times. Unfortunately, not everyone has the experience and knowledge to make sense of the noise and find true value in the markets. As we continue to explore the hoax of modern finance, it is important to remember to be critical, question the sources, and understand the terminology and technical indicators we use. With this knowledge, we can be one step closer to being successful in the financial world.