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To: Lawrence Burg who wrote (212)2/23/1998 8:21:00 PM
From: JOHN SAMSEL  Read Replies (1) of 747
 
Lawrence,

Thanks for taking the time to give me the basics of TA. I can see relationships with the control charts used in process management and TA. In process management we collect data on an operation for a few months. We compute the average of the daily variations and get a baseline. From the baseline we plot the daily variations on a control chart and create an upper and lower control limits. If the daily variations are within the control limits the system is stable. Not necessarily producing a quality product but a stable one, predictable.

In the TA method you described you use a DMA which gives some stability to the data against which you compare the daily fluctuations (the Stochastic measures) . This daily fluctuation compared to the average tells you if you are within some control limits or are ready to break out. In TA breaking out is good or bad depending on the direction, I presume.

Breaking out of the control limits in Process control makes us look for a special assignable cause of variation so we can eliminate and bring the process back to stability. Process management is a data driven process by which we can control product quality.

TA looks like a data driven process by which we can control our portfolio quality and profits.

Does that make sense?

John
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