Explaining The Term Technical Analysis
The study of price action with a value for the purpose of forecasting profitable price trends and the movement known as technical analysis. The price action is defined as a movement in the price of a value, volume and open interest.
Technical analysis is primarily, perhaps not exclusively, performed by chart performance in recent years. Many different methods and instruments are new in the technical analysis, but all are based on the assumption that the superlative price patterns and trends in the markets and therefore they can be identified and used so well.
Technical analysis does not attempt to analyze the financial data of the company say that the cash flow, dividends and projection of future dividends, an area of analysis is also known as fundamental analysis. However, some speculators are trying to combine the technical analysis as elements of technical and fundamental analysis.
Like any method of prediction is that technical analysis is not 100% accurate, but certainly the efforts, the presumed outcome. Some forms of technical analysis, such as graphics are considered by many scientists as more art than science.
Some research concludes that the school has the technical analysis of little evidential value, while other studies show that the practice of bringing extraordinary benefits. For example, measurable forms of technical analysis by non-linear prediction with neural networks showed that occasionally reach a statistically significant prediction results.
Lets take an example to understand the debate about the effectiveness of technical analysis, a famous and successful fundamental analyst, once said: "The graphics are great for predicting the past."
In a working paper of the Federal Reserve has shown that the statistical properties of intraday price changes foreigners change in the vicinity of support and resistance lines, "without showing that this result is something new in a profitable business would approach.
History of technical analysts
The premises of technical analysis derive from the observation of financial markets over a long period say hundreds of years. Perhaps the oldest branch of technical analysis is the use of techniques ensures that Japanese traders, at least as early as the 18th Century and is still popular today.
Another theory is the recovery in the collected writings of Dow Jones, the founder and editor Charles Dow, on the use and advancement of the engineering analysis of the late 19th Century is based. Modern research is Dow Theory, the foundation stone.
For the technical analysis of the technical tools and theories have been developed and improved considerably in recent decades, with emphasis on knowledge of computer technology.
Common beliefs about Technical Analysis
The technical analysis is not at all interested in a price for what is moving, but when it moves in a certain direction or a particular graphic pattern. For example, the incomes of the poor, the difficult business environment, poor management or other reasons.
Technical Analysis Analysts believe that one gains through the concept will be made following the trend. "The intention here is to say that if the respective share is steadily increasing, that is, tend to be higher following a technical analyst looking for opportunities to buy, to this stock.
Until the technical analysts believe that this trend has reversed or constant composition, everything else, we keep this security model.
Further, to provide the technical analysts in the search for techniques to analyze the different price pattern is a table of prices, and take positions in anticipation of the expected trend according to the model. Tools analysts believe that the technical assistance to determine where trends have been formed, the composition and develops so on, until certain patterns.
The analysis may conflict with fundamental analysis. Fundamental analysis maintains that markets can and miswrite security by various methods of fundamental analysis, the "right" price can be calculated.
The services may be on the trading of mispriced security and then wait for the market to distinguish their "mistake" and set the new security. In contrast, a technical analyst is not interested in the process of technical analysis in the price "real value", but only in the movement of prices.
While the technical analysis carried out two words, including technical analysts, "The trend is your friend" and "Do not forget the basics and follow the money." An example of the different points of view known technical and fundamental analysis as follows .
Suppose that a stock was trading at 124th 25 pence, and the sight of the fundamental agreement of the population analysis was performed with a value of 120 00 pence. If the stock price rose to 125 00 pence, then to 126th 00 pence, and then to 127 00 pence, a technical analyst for the technical analysis would probably benefit from a buyer of the population from the perceived development.
In contrast, a fundamental analyst would probably sell the shares, since moving away from what the analyst considers it essential to "correct" price.
