Technical Analysis
Technical Analysis is a technique for forecasting the direction of stock prices based on past market data. Itas simplest form takes only two variables into account: 1) price, and 2) volume. At this level, Technical Analysis is an overly simplified statistical analysis of market trends, and while many people have claimed positive results, it does not stand up to the scrutiny of academic mathematicians.
Over the past years, technical analysts have argued that a company's specific data affects the price and value of their stocks, therefore making fundamental analysis unnecessary. The method of fundamental analysis utilizes a comprehensive company profile to predict future trends.
The objective of technical analysis is to increase an investoras profit by predicting future market trends instead of guessing. Using similar data in a different way, fundamental analysis creates the same result. The goal of technical analysis is to provide a simple mathematic gauge to help make investment decisions easier.
One of the typical graph patterns used by professional technical analysts to make trading decisions is the, aHead and Shoulders.a Two similar-sized peaks with a higher center peak are graphic indicators. These patterns may not be mathematically valid, argue some critics, but the result of the psychological predisposition of humans to form patterns in a random geographical area.
Though technical analysts aim to objectively measure market trends, subjective bias may cause quantitative data to be overlooked. Attributing more or less weight to some statistical patterns or favoring certain charting methods are some factors that can limit quantitative prediction of the market.
The future of Technical Analysis, and Fundamental Analysis too, is giving way to the power and promise of machine learning and artificial intelligence. Machine learning does what all analysis systems attempted "automate the decision-making process" but without the limitation of how much data could be physical processed.
Unlike an analyst, a computer can pick up miniscule details that on the surface seem unrelated to the trend being evaluated. Additionally, is not predisposed to identify false patterns. Computers can identify trends of any size, though analysts tend to look for just the larger trends.
Whether machine learning will replace Technical Analysis, or will be used as a tool to improve it, it is likely that many existing analytical paradigms will become less relevant as our tools become better, and reveal the shortcomings of our prior techniques.
Over the past years, technical analysts have argued that a company's specific data affects the price and value of their stocks, therefore making fundamental analysis unnecessary. The method of fundamental analysis utilizes a comprehensive company profile to predict future trends.
The objective of technical analysis is to increase an investoras profit by predicting future market trends instead of guessing. Using similar data in a different way, fundamental analysis creates the same result. The goal of technical analysis is to provide a simple mathematic gauge to help make investment decisions easier.
One of the typical graph patterns used by professional technical analysts to make trading decisions is the, aHead and Shoulders.a Two similar-sized peaks with a higher center peak are graphic indicators. These patterns may not be mathematically valid, argue some critics, but the result of the psychological predisposition of humans to form patterns in a random geographical area.
Though technical analysts aim to objectively measure market trends, subjective bias may cause quantitative data to be overlooked. Attributing more or less weight to some statistical patterns or favoring certain charting methods are some factors that can limit quantitative prediction of the market.
The future of Technical Analysis, and Fundamental Analysis too, is giving way to the power and promise of machine learning and artificial intelligence. Machine learning does what all analysis systems attempted "automate the decision-making process" but without the limitation of how much data could be physical processed.
Unlike an analyst, a computer can pick up miniscule details that on the surface seem unrelated to the trend being evaluated. Additionally, is not predisposed to identify false patterns. Computers can identify trends of any size, though analysts tend to look for just the larger trends.
Whether machine learning will replace Technical Analysis, or will be used as a tool to improve it, it is likely that many existing analytical paradigms will become less relevant as our tools become better, and reveal the shortcomings of our prior techniques.
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6:45 AM
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