Technical analysis 1

Technical analysis

Technical analysis

From Wikipedia, the free encyclopedia

Jump to: navigation, search

Financial markets
Public market Exchange Securities
Bond market
Bond valuation Corporate bond Fixed income Government bond High-yield debt Municipal bond
Stock market
Common stock Preferred stock Registered share Stock Stock certificate Stock exchange Voting share
Derivatives market
Credit derivative Futures exchange Hybrid security Securitization
Over-the-counter
Forwards Options Spot market Swaps
Foreign exchange
Currency Exchange rate
Other markets
Commodity market Money market Reinsurance market Real estate market
Practical trading
Clearing house Financial market participants Financial regulation
Finance series
Banks and banking Corporate finance Personal finance Public finance
v t e

In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.^[1] Behavioral economics and quantitative analysis use many of the same tools of technical analysis,^[2][3][4][5] which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.^[6]

Contents

 [hide] 

• 1 History
• 2 General description
• 3 Characteristics
• 4 Principles
  • 4.1 Market action discounts everything
  • 4.2 Prices move in trends
  • 4.3 History tends to repeat itself
• 5 Industry
• 6 Systematic trading
  • 6.1 Neural networks
  • 6.2 Backtesting
• 7 Combination with other market forecast methods
• 8 Empirical evidence
  • 8.1 Efficient market hypothesis
    • 8.1.1 Random walk hypothesis
• 9 Scientific Technical Analysis
• 10 Ticker tape reading
• 11 Quotation board
• 12 Charting terms and indicators
  • 12.1 Concepts
  • 12.2 Types of charts
  • 12.3 Overlays
  • 12.4 Breadth Indicators
  • 12.5 Price-based indicators
  • 12.6 Volume-based indicators
• 13 See also
• 14 Notes
• 15 Further reading
• 16 External links

History[edit]

The principles of technical analysis are derived from hundreds of years of financial markets data.^[7] Some aspects of technical analysis began to appear in Joseph de la Vega's accounts of the Dutch markets in the 17th century. In Asia, technical analysis is said to be a method developed by Homma Munehisa during early 18th century which evolved into the use of candlestick techniques, and is today a technical analysis charting tool.^[8][9] In the 1920s and 1930s Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered to be one of the seminal works of the discipline. It is exclusively concerned with trend analysis and chart patterns and remains in use to the present. As is obvious, early technical analysis was almost exclusively the analysis of charts, because the processing power of computers was not available for statistical analysis. Charles Dow reportedly originated a form of point and figure chart analysis.
Dow Theory is based on the collected writings of Dow Jones co-founder and editor Charles Dow, and inspired the use and development of modern technical analysis at the end of the 19th century. Other pioneers of analysis techniques include Ralph Nelson Elliott, William Delbert Gann and Richard Wyckoff who developed their respective techniques in the early 20th century. More technical tools and theories have been developed and enhanced in recent decades, with an increasing emphasis on computer-assisted techniques using specially designed computer software.