Many forex traders who rely solely on technical analysis to make
decisions. Various technical analysis tools that have been accepted by
most forex traders and became real friends in everyday life of their
trading. However most other traders were skeptical of technical
analysis. They are often of dubious reliability criticism contending
technical analysis to predict price movement, either in the market
forex, stocks, and other types of markets. Here are some of the common
criticisms from traders to technical analysis and response of the
criticism against technicalist trader.
1. There is no scientific evidence that suggests that technical analysis can work well
The more claims are somewhat less obvious, or just vague because it is not specifically stated how scientific evidence is meant. It is not difficult to prove that technical analysis can work well, in the sense of a particular method could run well in the uncertain period of time. Indeed a method does not always work properly all the time because it is affected by the State of the market, in the sense of the nature of market price movements are not always equal or proportional.
With technical analysis you can predict future price movements with other types of effective than analysis. Not all methods of technical analysis are lagging (tend to be late) like on most indicators. The lines of support or resistance, channel trends, pivot points or Fibonacci retracement levels are just a few examples of technical analysis that can be used to predict price movement with effective.
2. technical analysis can run because it fulfilled itself (self fulfilling)
The other claim is that technical analysis can work because many traders believe that technical analysis can work well so it will be fulfilled by itself. For example, an oscillator indicator shows overbought conditions (saturated buy), the trader will be busy-busy open positions sell so come down in price. If we look at the stock market, should a stock will drop sharply when the movement of the price under the 200 day sma as all the technicalist traders sold shares, but in reality it is not so.
Another example, Elliot wave analysis with theory is quite popular and many of his followers in Eastern Europe (formerly known as the Eastern bloc), but very few traders in Western Europe that use such analysis. So how could the price will move in accordance with waves of Elliot if that move just a portion of Eastern European traders instead?
The method relied on by each trader technicalist so differing claims that technical analysis can run for being met by itself was not realistic.
3. market price movements is random (random) and cannot be predicted
Random Walk Theory has become popular because it is a book written by Burton Malkiel, titled ' A Random Walk Down Wall Street, '' published in 1973. The followers of this theory believe that market prices move efficiently around the intrinsic value of his (intrinsic value).
Followers of the theory of random and technicalist have in common view that all that affects price movements have been reflected in the price of the market itself, the difference is technicalist believe that price changes can be predicted with technical analysis, theory of random followers believe was the price movement caused by the existence of information that affects the price of essential values. With the current state of where the market is no longer efficient, then the theory will fall by itself, and a technical analysis will still be used as a prediction tool of effective price movements.
The more claims are somewhat less obvious, or just vague because it is not specifically stated how scientific evidence is meant. It is not difficult to prove that technical analysis can work well, in the sense of a particular method could run well in the uncertain period of time. Indeed a method does not always work properly all the time because it is affected by the State of the market, in the sense of the nature of market price movements are not always equal or proportional.
With technical analysis you can predict future price movements with other types of effective than analysis. Not all methods of technical analysis are lagging (tend to be late) like on most indicators. The lines of support or resistance, channel trends, pivot points or Fibonacci retracement levels are just a few examples of technical analysis that can be used to predict price movement with effective.
2. technical analysis can run because it fulfilled itself (self fulfilling)
The other claim is that technical analysis can work because many traders believe that technical analysis can work well so it will be fulfilled by itself. For example, an oscillator indicator shows overbought conditions (saturated buy), the trader will be busy-busy open positions sell so come down in price. If we look at the stock market, should a stock will drop sharply when the movement of the price under the 200 day sma as all the technicalist traders sold shares, but in reality it is not so.
Another example, Elliot wave analysis with theory is quite popular and many of his followers in Eastern Europe (formerly known as the Eastern bloc), but very few traders in Western Europe that use such analysis. So how could the price will move in accordance with waves of Elliot if that move just a portion of Eastern European traders instead?
The method relied on by each trader technicalist so differing claims that technical analysis can run for being met by itself was not realistic.
3. market price movements is random (random) and cannot be predicted
Random Walk Theory has become popular because it is a book written by Burton Malkiel, titled ' A Random Walk Down Wall Street, '' published in 1973. The followers of this theory believe that market prices move efficiently around the intrinsic value of his (intrinsic value).
Followers of the theory of random and technicalist have in common view that all that affects price movements have been reflected in the price of the market itself, the difference is technicalist believe that price changes can be predicted with technical analysis, theory of random followers believe was the price movement caused by the existence of information that affects the price of essential values. With the current state of where the market is no longer efficient, then the theory will fall by itself, and a technical analysis will still be used as a prediction tool of effective price movements.
Posted by Unknown on Thursday, February 12, 2015 - Rating: 4.5
Title : Some Of The Criticism Of Technical Analysis
Description : Many forex traders who rely solely on technical analysis to make decisions. Various technical analysis tools that have been accepted by mo...
Description : Many forex traders who rely solely on technical analysis to make decisions. Various technical analysis tools that have been accepted by mo...
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