History of Technical Analysis from more than 100 years ago, from a man named Charles H. Dow. He is founded on the Wall Street Journal (The Wall Street Journal). After years of research, in 1884 he gave only the average of closing prices ...
History of Technical Analysis from more than 100 years ago, from a man named Charles H. Dow. He is founded on the Wall Street Journal (The Wall Street Journal). After
years of research, in 1884 he gave only the average of closing prices
of 11 stocks most important U.S. market at that time. William
Peter Hamilton is really brought life to the study of the Dow by
continuing research and published the book "The Stock Market barometer"
(Barometer stock market) in 1922. Throughout the 1920s and 1930s, Richard W. Schabacker
who went deep into the study of Dow and Hamilton, Schabacker, who
introduced the concept first on Technical Analysis. Schabacker served as editor of Forbes magazine fame. He
pointed out that the Dow theory signals that come up with an average
market index remains valid and important when applied to graphs of each
individual stock. This was his show and prove in his book "Stock Market Theory and Practice, Technical Market Analysis and Stock Market Profit." Thus
the first basis of technical analysis appeared in the Dow theory, but
not until Schabacker - the father of modern analysis techniques followed
by Edward and Magee to "Technical Analysis of Stock Trend" ( book
was reprinted eight times) and today is John Murphy, Jack Schwager,
Martin Pring, ... then the real birth name "Technical Analysis" and is
improving, summarized into a theoretical system important in investment analysis on the stock market in particular and financial markets in general.
Perspectives on Technical Analysis
The
principle of success in investment securities is based on the
assumption that in future people will continue to repeat the mistakes
that they have acquired in the past.
The
stock market or any market which are never reflect the real value of a
commodity that is exchanged within which it reflects the value that
investors are aware that it's worth and as world.
The
price of any securities which are not spent for the actual relationship
between supply and demand which is reflected expectations of future
supply and demand.
So "Technical analysis" is what? Many observers considered Technical analysis is a collection of tricks and need to exercise really serious. Those who apply after the results of that exercise is also known as "wizards". Many
people know about the correctness of this work but they still raises
questions about the accuracy in predicting the trend of the stock market
and the markets of other goods. Itself
in those who use technical analysis does not have a consensus of
opinion on the nature of technical analysis because technical analysis
can be understood purely as a science that can also be understood is an art.
Understood
by the widest Technical analysis tries to study the status of "current
health of the overall market or of each stock with the aim to predict
future price movements based on the business by experience
has been with the technical model (or model techniques) market has
emerged in the past and apply again when the same model appears. Fundamental
assumption of technical analysis is the knowledge we have about the
price and chart patterns in the past will be used "reference" to
determine the price trend in the future how to market to particular field.
Some definitions have been made about Technical Analysis
Nick and Barbara Apostolous definition:Technical
analysis is "the process of forecasting stock price movements in the
future based on analysis of past fluctuations in prices and the
pressures of supply and demand affect prices." However,
this definition makes technical analysis seems more nearly equivalent
to fundamental analysis - is the process of estimating the value of
securities or commodities by analyzing the financial and economic
conditions underlying each company, every industry, ... "
Norman Fosback, in his book "Stock Market Logic":"If
the nature of fundamental analysis is the valuation and identification
to buy or sell stocks when the market price deviations from real values,
the Technical Analysis is based on two fundamentally different theories
completely. First,
the subjective estimate is too vague and irrelevant and the second is
price fluctuation in the future can be predicted by analyzing past price
movements, analyzing the supply relationship - demand and other factors have a direct impact to the market price. "
Clifford Pistolese made quite adequate definition as follows:"Technical analysis is the use of price charts and trading volume as a basis for investment decisions. Fundamental
basis for this approach is that the information on price and volume
charts reflect on all that took place about buying or selling a stock. Because
stock chart summarizes and reflects the results of the transactions
made to Technical Analysis is the only basis for making investment
decisions. "
R. W. Schabacker, the father of modern analysis techniques have been described:Technical analysis as "a new science." Schabacker
explained that all the basic factor analysis are reasonable to bring
down mobile market situation and they are evaluated, and stored
automatically included in the balance carried on the stock chart. He
further describes the characteristics of the stock chart or diagram
other commodities as a perfect memory of the market and confirm that the
main value of a price chart beyond the mind the fact that a picture recording transactions in the past.
Schabacker specific definition of the following:"The
technical analysis of market volatility is an aspect of the analysis,
based on the phenomena arising from the market, ignoring the effects of
the elements of fundamental analysis and the weak other factors. Actually
Technical analysis can be explained simply as a way to speak again with
the consideration by the school's basic analysis. Fundamental
aspect of market analysis aimed specifically concerns on factors such
as issuing corporate stock, business enterprises, potential, past
activities, current income and future ,
balance sheet accounting, financial strength, quality of business
leadership team, ... The technical factor is what can be considered as
overall factors affecting the ability to price fluctuations shares after ignoring the elements of fundamental analysis and the factors that have not really affected. "
But according to Edward and Magee are:"Technical
analysis is the science of the record, usually in the form of graphs,
the trading activity takes place in the past cause price changes,
trading volume, of a security ... any
general or with the entire market and then will be based on the
"picture of the past" to infer that the trend may occur in the future. "
It
is no coincidence that the book "Technical Analysis of Stock Trend" by
Edward and Magee is replicated back to 8 times, this is the book offers
the most complete and most basic understanding of technical analysis, so
to be able to understand it is very necessary to study this book carefully. Here
will add some quotes to help the reader understand a bit more "...
technical analysts always told the full reason is the amount of
information, analyze data that is basically obsolete and research no
use value. Because sentiment is not interested in the past and even
now, the market is always forward, trying to reflect the growth in the
future, consider measuring and
to balance all these estimates, predictions of hundreds of investors -
those who look into the future together, but under completely different
angle and with colored glasses. In summary, the market price is
made up by the market itself, including all of the basic information
that people want to statistical analysis to find out along with many
other sources of information as important as or larger than many ... "
Edward and Magee also offers the following four basic points of technical analysis:- Market value of securities is determined only through interaction between supply and demand.- Supply and demand is influenced, at any time, by hundreds of factors that influence some reasonable, some almost absurd. Information,
opinions, psychology, prediction, ... (may be true, could be wrong,
...) on the future mix and mingle with each other and with other
elements necessary to form the overall balance of the whole market. No one person can grasp and quantify these things that the market will perform.-
Ignoring the small fluctuations will generally exercise price under the
general trend of market prices, the trend is stable over a relatively
long period.-
Changes in market trends shown by the shift of equilibrium of supply
and demand, whether for any cause can be identified earlier or later
than the volatile markets.
Finally we will consider the definition of Steven B. Achelis, author of the book "Technical Analysis from A to Z":"Technical
analysis is the study of prices, the basic tool is a diagram, in order
to improve the efficiency of investment activities ..."
After
the definition of technical analysis is just so simple but specific
nature, how performance will be studied in the next section. I invite to see the next part of Dow theory.
