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people doubt that technical analysis is useful.
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analysis - the proof
Related links: Technical Analysis - Getting Started; Technical Analysis - What is it?; 4 Windows approach
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The subject of technical analysis is very broad, and includes some topics that some people regard as on the fringe. However, there are core aspects of this subject that are very widely accepted, and implemented effectively by financial market participants for the investing and trading of shares, currencies, commodities and more.
However, many professionals in the finance industry still refute the notions of technical analysis for a variety of reasons - and some of these might be self-interested and selfish reasons.
There are many research papers compiled over the years with varying degrees of support for the subject. The references below are just some of these.
Price charts summarise the
In December 2004 a very interesting meeting with profound ramifications took place in the US. Ralph Acampora, CMT co-founder (CMT - Chartered Market Technician) and past president of the MTA (Market Technicians Association), has described what took place in 2004 as follows (reproduced from MTA material on the 10th anniversary of that meeting in December 2014).
"On Friday 17th December 2004, the MTA presented their case for the use of professional technical analysis on Wall Street before 20 NYSE, AMEX and NASDAQ lawyers. The question before the lawyers was whether or not the CMT would be recognized with the same weight and value as a CFA (Chartered Financial Analyst) under the new regulatory code brought forth through the Sarbanes-Oxley Act.
The ruling in favor of the CMT is a lasting testimonial to the professionalism of the MTA. FINRA continues to recognize CMT charterholders with an exemption on the Series 86 Registered Research Analyst exam and the MTA continues to promote this highest order of professionalism, competency and ethical practice in the field of technical analysis."
The discussions and outcome from that meeting are indeed profound for the use of technical analysis around the world. The bit that we really like in the above is the question: "What is fact on that (price) chart?", the fantastic answer to which is:
On a price chart, the price is a fact. Furthermore, company earnings are an estimate. Companies can restate earnings, but the market never restates the price.
Momentum Strategies Work? - Australian Evidence. DREW,
VEERARAGHAVAN and YE, Discussion Paper No. 169,
2004. School of
Economics and Finance Queensland University of Technology. Especially
see the Conclusion section p18.
Shoulders above the Rest? The Performance of Institutional Portfolio
Managers who Use Technical Analysis.
SMITH, FAUGERE and WANG, 2013. Department of Finance and Center for
Management, School of Business, University at Albany (SUNY), Albany, NY
12222 USA. In particular refer to the Conclusion section on p23: "In
view of these results, we conclude that the net effect of technical
analysis on the management of institutional equity-related portfolios
has beenbeneficial, although
in an unexpected way."
of Technical Analysis: Computational Algorithms, Statistical Inference,
LO, A.W., et al., 2000. The Journal of Finance. A 60-page extract from
"THE JOURNAL OF
FINANCE", VOL. LV, NO. 4, AUGUST 2000. In particular see the Conclusion
section on page 1753.
Profitability of Technical Analysis: A Review.
PARK, C.H. and S.H.
IRWIN, 2004. AgMASProject Research Report 2004-04. In particular see
section, and the Table 1, "Summary of early technical analysis studies
published between 1961 and 1987", pp72-78, and Table 3, "Summary of
standard technical analysis studies published between 1988 and 2004",
pp80-84. Also see other tables for further references, including Table
10, page 102.
Position sizing methods for a trend following CTA. Master of Science Thesis, Stockholm, Sweden, 2014. Henrik Sandberg, Rasmus Öhman. [CTA - Commodity Trading Advisor]
strategies may be profitable because they presume that price adjusts
"In conclusion, we
found consistent evidence that simple technical trading strategies were
More details...For more information about breakouts, and more samples from which to learn,
refer to the eBook Articles in the Share Market Toolbox - see the links at top right.
Brainy's pages on TA, and then
refer to the ATAA
web site, or the IFTA web site.
TerminologyAny special terms that might be used in the text at left, can probably be found discussed in the Toolbox somewhere. Perhaps in Brainy's eBook Articles - see the Master Index list for details. Or, search the eBook Articles.
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