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Thursday, December 10, 2009

Technical Analysis analyzing come from what?

Since we would all have the same completely logical expectations, prices would only change when quarterly reports or relevant news was released, like politic issue, unemployment news, annual report, demand, and etc. Investors would seek "overlooked" fundamental data in an effort to find undervalued prices. This theory concludes that it is impossible to forecast prices, since prices already reflect everything. That the future can be found in the past

If prices are based on investor expectations, then knowing what a security should sell for (i.e., fundamental analysis) becomes less important than knowing what other investors expect it to sell for. That's not to say that knowing what a security should sell for isn't important--it is. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove.

Technical analysis is the process of analyzing a historical prices in an effort to determine probable future prices. This is done by comparing current price action (i.e., current expectations) with comparable historical price action to predict a reasonable outcome. The devout technician might define this process as the fact that history repeats itself while others would suffice to say that we should learn from the past. The roulette wheel In my experience, only a minority of technicians can consistently and accurately determine future prices. However, even if you are unable to accurately forecast prices, technical analysis can be used to consistently reduce your risks and improve your profits.

Contrary to popular belief, you do not need to know what a price will be in the future to make money. Your goal should simply be to making profitable trades. Even if your analysis is as simple as determining the long-, intermediate-, and short-term trends, you will have gained an edge that you would not have without technical analysis. While the company may have great earnings prospects and fundamentals, it just doesn't make sense to buy this stock until there is some technical analysis evidence in the price that trend is changing.