Tuesday, November 14, 2006

Technical analysis

Technical analysis, also known as charting, is the study of the trading history (the price and volume over time) of any type of traded security (stocks, commodities, etc.) to attempt to predict future prices

Wanna know more, go to Wikipedia ofcourse. http://en.wikipedia.org/wiki/Technical_analysis

Technical analysis rely on the assumption that price patterns and trends exist in markets, and that they can be identified and exploited. Two well known sayings among technical analysts are, "The trend is your friend," and "Forget the fundamentals and follow the money."

Critics of technical analysis include well known fundamental analysts. Warren Buffett has exclaimed, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer" and "If past history was all there was to the game, the richest people would be librarians." Still, even an investor like Buffett occasionally recognizes technical analysis. In a recent conference on investing in mining companies, Buffett commented, "In metals and oils, there's been a terrific [price] move. It's like most trends: at the beginning, it's driven by fundamentals, then speculation takes over...then the speculation becomes dominant."

In the process of learning about Technical analysis, the question that bothers me is whether it is possible for a small investor to be able to harness the value of TA( if at all there is some value) ? I ponder over the time and energy required vis a vis the investment amount.

There is a perennial debate between technical analyst and the fundamentals analyst about the effective way to making big money in the stock market. But I feel that the only way is to understand the various strategies for investing oneself and strive to achieve the proper state of mind for successful investing. So pretty soon you’ll be able to make your own stock picks. Isn't taking responsibility for oneself a better idea?

Maybe it's the hard way. But being wary of the self proclaimed experts who have a knack of making their way with sophisticated terminologies and jargons, I prefer that. These experts use advanced Statistics, I'm told. But Statistics is the only science where the same figures are used by different experts to arrive at different conclusions. I'm baffled, how about you?
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