Technical Analysis 101

By Michael Swanson

Technical analysis is the name given to one of the techniques use to forecast how prices are likely to perform moving forward in the stock market. It works by analyzing data of past performance, using various criteria. Most often the criteria focused on are price, volume and time. Much of the study is completed through the study of charts, and analysts are often referred to as "chartists" for this reason. WallStreetWindow.com specializes in it.

For many, technical analysis lacks any real theory that underpins it, and is subsequently without credence. However, others argue that its results are justification enough, and point to its correlation to behavioral finance.

However, countering this view are those that question why it has not led to a robust automatic trading system, however, this would of course negate the human analytical mind so often falls flat as an argument.

However, other arguments exist of course; most commonly how to prove that technical analysis was the reason for success. Chartists counter this by providing back testing evidence, tough this is often dismissed as nothing more than conjuncture.

However, the basis that it does work is founded on proven facts that history, and trends and past performance do indicate the future. It is only sensible therefore to expect it to work. That experience in the field is applied to these studies too, suggests it is sound.

However, whilst different opinions are rife across many bodies; one thing does seem to bring both group together; that technical analysis should not necessarily be relied upon solely. And this is only sensible of course. After all, there are not many of us out there that go out foraging, only to place all of our eggs in just the one basket. - 23200

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