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.
"Head and Shoulders," a graph pattern that shows two equal peaks with a high center peak, is one of the typical patterns a professional technical analyst will utilize in making trading decisions. Some criticize that these patterns are a result of the humanas predisposition to form patterns in the geographically random environment, and are not mathematically valid.
Though technical analysts aim to objectively measure market trends, subjective bias may cause quantitative data to be overlooked. Attributing more or less weight to some statistical patterns or favoring certain charting methods are some factors that can limit quantitative prediction of the market.
The future of Technical Analysis, and Fundamental Analysis too, is giving way to the power and promise of machine learning and artificial intelligence. Machine learning does what all analysis systems attempted "automate the decision-making process" but without the limitation of how much data could be physical processed.
Unlike an analyst, a computer can pick up miniscule details that on the surface seem unrelated to the trend being evaluated. Additionally, is not predisposed to identify false patterns. Computers can identify trends of any size, though analysts tend to look for just the larger trends.
Whether machine learning will replace Technical Analysis, or will be used as a tool to improve it, it is likely that many existing analytical paradigms will become less relevant as our tools become better, and reveal the shortcomings of our prior techniques.
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.
"Head and Shoulders," a graph pattern that shows two equal peaks with a high center peak, is one of the typical patterns a professional technical analyst will utilize in making trading decisions. Some criticize that these patterns are a result of the humanas predisposition to form patterns in the geographically random environment, and are not mathematically valid.
Though technical analysts aim to objectively measure market trends, subjective bias may cause quantitative data to be overlooked. Attributing more or less weight to some statistical patterns or favoring certain charting methods are some factors that can limit quantitative prediction of the market.
The future of Technical Analysis, and Fundamental Analysis too, is giving way to the power and promise of machine learning and artificial intelligence. Machine learning does what all analysis systems attempted "automate the decision-making process" but without the limitation of how much data could be physical processed.
Unlike an analyst, a computer can pick up miniscule details that on the surface seem unrelated to the trend being evaluated. Additionally, is not predisposed to identify false patterns. Computers can identify trends of any size, though analysts tend to look for just the larger trends.
Whether machine learning will replace Technical Analysis, or will be used as a tool to improve it, it is likely that many existing analytical paradigms will become less relevant as our tools become better, and reveal the shortcomings of our prior techniques.
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4:38 PM
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