TradeSense: Technical Analysis
Here we show excerpts from our introduction to Technical Analysis, including explanations of basic concepts, such as signals and price patterns, and details of key TA indicators.
Part 7: Thursday 21 August 2008
Some critics of the discipline question the existence of trends, claiming that the market moves randomly and therefore cannot be forecast.
Rather than get bogged down in a statistical argument, the easiest way to counter this case is to look at real world charts.
The chart of the S&P 500 Index over the last 10 years shows three clearly identifiable long term trends.
As we have discussed, the fact that people act in crowds helps propagate trends, but the strongest and longest trends require good fundamental justification to back them up.
This justification may not be fully recognised until near the end of the trend but as technical analysts, we will have already identified the trend well before then.