Category:Technical Analysis

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«Those who fall in love with practice without science
are like a sailor who enters a ship without a helm or a compass,
and who never can be certain whiter he is going».
(Leonardo da Vinci)

This portrait of Joseph Wright must be considered as a warning. To Technical analysis must be asked the right questions, it can never tell us what will happen in the future, it is not about finding the philosopher's stone, but to pinpoint possible scenarios and decide whether to operate or not. Those who follows the "dark side" of the technical analysis will become a trading alchemist and he will be condemn to seek forever the desired object, without ever finding it: the ability to foreseen the future.
Technical analysis is a discipline that studies financial instrument price movements based on chart and algorithmic analysis, with the aim to identify and qualify price tendencies.

It is obvious that technical analysis can give no guarantees about price rise or fall, but it can give a good clue about a possible price moving scenario. It might seem to be not too much, but it can make the difference between a gain and a loss.

The traders who follow a technical analysis approach have been defined in several ways: analysts, technicians, technical analysts, market analysts, chartists. All these denomination were equivalent in the past, but nowadays, with the increasing specialization in this industry, this is not necessarily true anymore.

Technical analysis is not only the study of price charts anymore, there is a new kind of approach that might be defined quantitative, boosted by technologic innovation. Technical analyst can now rely on mechanical systems, mathematical micromodels which allow to eliminate the subjective component from trading.

For this reason being a chartist is different from being an analyst. The analyst represents the evolution in technical analysis. Through the variables examination, technical analysis must transform the investor from speculator to bookmaker, able to gives odds on events and therefore choosing whether to make an operation or not according to the amount of money he is willing to lose.

The fundamental analyst may obtain the same result of the technical analyst, but it is evident that his way is more complex and less flexible. It only takes few minutes to analyze a stock on a chart, while to evaluate a firm's balance sheet is completely different, especially when figures have been arrived at through a creative process.

The biggest trap for a technical analyst is the alchemist syndrome, a wish to foresee price movements, an impossibility as much as the will to transform lead into gold.



This category has the following 2 subcategories, out of 2 total.


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