Technical Analysis
A technique used to forecast the movement of stock prices based on past market data is called technical analysis. Though some have claimed positive results simply considering the variables of price and volume, academic mathematicians scrutinize this as an incomplete analysis of market trends and statistics.
Fundamental analysis, in contrast, creates a comprehensive company profile to determine future trend patterns. Historically, technical analysts have claimed that any relevant company specific data would affect stock price or volume, and would therefore be included in the technical analysis.
The purpose of Technical Analysis is to take the guesswork out of investing. It seeks to increase profits by predicting the future of the markets and trading against those predictions. Fundamental Analysis does the same thing but prefers to use different data, or use data differently. Perhaps more than Fundamental Analysis, Technical Analysis seeks to automate the decision making process by producing a purely quantitative measure of future trends.
One of the typical graph patterns used by professional technical analysts to make trading decisions is the, aHead and Shoulders.a Two similar-sized peaks with a higher center peak are graphic indicators. These patterns may not be mathematically valid, argue some critics, but the result of the psychological predisposition of humans to form patterns in a random geographical area.
The method of measuring and predicting market trends using quantitative methods may be limited. Subjective bias is evident when analysts give more or less consideration for certain statistical patterns or favor certain charting methods. Therefore, technical analysts traditionally ignore a great deal of quantitative data.
The promise of artificial intelligence and machine learning will impact the future of both technical analysis and fundamental analysis. This technology will automate the decision-making process of investing without the limitation of how much data can be physically processed by an individual.
Computers do not identify false patterns and are able to identify miniscule data that does not appear to relate to the trend being analyzed. Though analysts typically search for larger, more significant trends, computers can identify trends of any size.
It seems many current analytical paradigms will become less important as tools improve. Though it is unknown whether machines will replace technical analysis, it is certain that they will reveal the shortcomings of our prior techniques and help us improve them.
Fundamental analysis, in contrast, creates a comprehensive company profile to determine future trend patterns. Historically, technical analysts have claimed that any relevant company specific data would affect stock price or volume, and would therefore be included in the technical analysis.
The purpose of Technical Analysis is to take the guesswork out of investing. It seeks to increase profits by predicting the future of the markets and trading against those predictions. Fundamental Analysis does the same thing but prefers to use different data, or use data differently. Perhaps more than Fundamental Analysis, Technical Analysis seeks to automate the decision making process by producing a purely quantitative measure of future trends.
One of the typical graph patterns used by professional technical analysts to make trading decisions is the, aHead and Shoulders.a Two similar-sized peaks with a higher center peak are graphic indicators. These patterns may not be mathematically valid, argue some critics, but the result of the psychological predisposition of humans to form patterns in a random geographical area.
The method of measuring and predicting market trends using quantitative methods may be limited. Subjective bias is evident when analysts give more or less consideration for certain statistical patterns or favor certain charting methods. Therefore, technical analysts traditionally ignore a great deal of quantitative data.
The promise of artificial intelligence and machine learning will impact the future of both technical analysis and fundamental analysis. This technology will automate the decision-making process of investing without the limitation of how much data can be physically processed by an individual.
Computers do not identify false patterns and are able to identify miniscule data that does not appear to relate to the trend being analyzed. Though analysts typically search for larger, more significant trends, computers can identify trends of any size.
It seems many current analytical paradigms will become less important as tools improve. Though it is unknown whether machines will replace technical analysis, it is certain that they will reveal the shortcomings of our prior techniques and help us improve them.
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