How useful is technical stock analysis?

How useful is technical stock analysis?So how useful is technical stock analysis? Investors and traders always strive to find the most advanced stock price forecasting tool and, using this tool, to improve the results of their trading. Many investors achieve good results with the help of fundamental analysis, the description of which we have devoted to chapters 5-7. As for traders, for them the optimal choice is technical analysis, which will be discussed in x 9-11.

 

Despite the fact that fundamental and technical analysis to some extent overlap with each other, in both camps you can find solid and traditional supporters who have no doubt not only that their choice is the only correct one, but and that the opposite option is not just useless, but even harmful. As for the authors of this book, they are not supporters of extremes and believe that the truth, as always, is located approximately in the middle.

 

The technician — the person who interprets the charts — is confident that price charts and market statistics can be used to develop an effective bidding plan. Some technicians even claim that the price chart, which reflects the change in the price of a stock up to the present moment, can predict the direction of the further movement of the price of shares. Skeptics, on the other hand, argue that technical analysis is just a synonym for guessing on the coffee grounds, with which the rascals of all stripes try to avoid the troubles that local and state authorities and authorities can create for them.

 

If Ms. Cleo is a professional fortune teller on tarot cards, accused recently of fraud and deceit of her clients - she made a living by predicting the price of the shares, then it is possible that she would still be successful in her business. Similarly, if she lived in earlier times, it is possible that her prophetic talents would enjoy great respect and honor not only among the broad masses, but also among the clergy, and would not be rejected with contempt as one of the varieties of charlatanry.

 

In ancient Rome, people who studied the movement of stars, planets and bird behavior were very popular. Not less popular were people who studied the insides of sacred animals. For example, a huge respect was used by the garuspec, a gut specialist. Speaking as August, the official Roman prophet, Mrs. Cleo could well have predicted certain events or reactions of the gods to any future turns of events. She would be in the center of attention and would certainly have achieved in the ancient Roman society the same high position that she had before the moment when her activity caused the increased interest of the FTC. However, on no other outcome, Mrs. Cleo could not count.

 

Despite the unlucky fate of Ms. Cleo, numerous soothsayers continue to do their business. Are the most successful among them those who predict future price movements by interpreting the "insides" of diagrams reflecting stock price fluctuations? This is what financial experts think about this. So, scientists believe that technology, like astrologers and soothsayers of antiquity, track these lines and squiggles, trying with their help to predict the behavior of stock prices.

 

Fortunately, the insides of diagrams reflecting stock price fluctuations do not look as disgusting as the insides of the sacred animals that the Haruspex had to study. Nevertheless, scientists and specialists in fundamental analysis are often perceived by technicians as Haruspexes, although, in our opinion, the analogy is not quite appropriate here. Technical analysis is not a prediction tool. This is just a tool for trading - and nothing more.

 

Despite the fact that the technicians are trying to predict the future and make plans for conducting tenders based on the lines and squiggles shown in the price change chart, technical analysis has practically nothing to do with fortune telling or the tarot cards. Instead of trying to predict the future, technical analysis is used to identify possible future events and draw up plans for bidding in case these events actually happen.

 

To understand the methods used by the technical analyst, you should familiarize yourself with the following concepts of technical analysis:

in the price is everything;

price movements are not random;

price changes are due to an imbalance between supply and demand.



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