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.
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.
Many detractors however do not accept this, and inquire as to why no automated programs have been able to come out of this work; suggesting therefore it is not a stable nor reliable process.
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.
The basic argument for those supporting the technique, is that it just makes sense to study past performance, pricing trends, and any areas where upon a variant and a constant can be linked. Trends in the markets do occur regularly; this is just an accepted fact; understanding where these trends are going to recur is merely applying a technique.
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.
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categories: business,finance,investing