subject: Technical Stock Market Analysis [print this page] There are many techniques in forecasting trends these days for stock trading; one that has been around for a number of years is technical analysis. This works by analyzing certain trends; including time period and volume, though mainly focuses on pricing in reference to these. A very complex process in many respects, it tends to center around charts, graphs and dot references.
However, though it sounds a strong process, with clear ideals and visions; many are not impressed. They say it lacks structure and reasoning. To counter this, those supporting the technique argue that its links with behavioral finance function and proven results over the years are its justification.
Another objection to the technique rests upon how, if it is so sound a function, that automatic trading strategies should be a matter of course in its development; that this is yet to be the case is held up as proof is doesn't work.
A lack of evidence that technical analysis was the sole reason for successful strategy trading has also been held up for discussion in the camp against its merits. However, chartists argue that back testing evidence has been delivered; simply that it is not understood by the detractors.
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.
Advocates of the system, and objectors to it, do seem to come together in some sort of agreement however. Whilst both have very differing views, both state that technical analysis should be used not as standalone technique, but more just one of several weapons to understand fluctuations in the market and apply strategy effectively.
