Talk:Technical analysis

The second line of Intro says "Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands in contradiction to much of modern portfolio theory."

Behavioral Economics DOES NOT "incorporate" technical analysis. Also, SOME quantitative models use technical analysis, but the introduction makes it sound like ALL quantitative models use technical analysis. Also, what does active management have to do with MPT? It is EMH that says active management is not possible (as captured in the third line). I am taking out that second line.

Here is the low down on Behavioral Economics:

(1) According to the book "Advances in Behavioral Economics":

"This conviction [use of psychological realism] does not imply a wholesale rejection of the neoclassical approach to economics based on utility maximization, equilibrium, and efficiency. The neoclassical approach is useful because it provides economists with a theoretical framework that can be applied to almost any form of economic (and even noneconomic) behavior, and it makes refutable predictions. Many of these predictions are tested in the chapters of this book, and rejections of those predictions suggest new theories. Most of the papers [in Behavioral Economics] modify one or two assumptions in standard [Economic] theory in the direction of greater psychological realism. Often these departures are not radical at all because they relax simplifying assumptions that are not central to the economic approach."

So, please understand how behavioral economics fits into economics.

(2) In the world of mathematical modeling, the approach followed by technical analysis falls under the category of Empirical Modeling. There is nothing wrong in using empirical models to predict future outcomes (and I am not interested in a debate of whether empirical modeling is the correct way to predict future stock prices -- To Each His Own!). Models incorporating behavioral economics tend to fall under the category of explicative or simulation modeling. Yes, volume and price generated from the markets are used -- not as inputs to the model, but to validate the model. The use of market generated volume and price in such manner does not make it technical analysis (if it does, then the sections "Description" and "Principles" in the the article are invalid). In other words, models based on behavioral economics try to EXPLAIN a market phenomenon and use market generated information to VERIFY the validity of the model. In comparison, technical analysis DOES NOT explain anything but tries to predict future outcomes. — Preceding unsigned comment added by 59.161.191.227 (talk) 20:39, 19 November 2011 (UTC)

Please read WP:AGF. Nobody's abusing anything. The whole point of Wikipedia is that you can edit it for any good reason. In your case, editing to correct errors and misunderstandings and using reliable sources (as opposed to original research) is what it's all about. "I will wait for a week before I take out the second line." Why a week? If it's wrong, be bold and go for it now. CityOfSilver 20:59, 19 November 2011 (UTC)

Point taken. Thank you. I have edited my previous entry to reflect your point.

I believe that quote that you were mentioning is taken from a reliable source. Technical analysis tries to predict the future, but it tries to predict the future using the same basis and reasons as behavioral economics/finance. All of TA is based on psychological reaction to various stimuli. Behavioral economics, which came after TA, built on TA's base. Whether academics like it or not, TA is part of behavioral finance, a truism that many academics absolutely agree with. The exact wording might need to be made more clear (and I will get the quote from the source I refer to tomorrow, but the general theme remains 100% correct. No technician believes he/she can predict the market for any reason other than due to the same principles that behavioral economists use. The difference being that technicians do not use everything that behaviorists (or quants) use. The overlaps are substantial. They are not the same, but all three fields are close relatives.Sposer (talk) 17:24, 20 November 2011 (UTC)

I tend to agree with your assertion that there are people who practice TA influenced by the psychology of human decision making under uncertainty. However, I don't agree with your statement "Behavioral economics [is] built on TA's base." Behavioral economics got started based on the work done by Amos Tversky and Daniel Kahneman, two psychologists who tested the validity of rational expectations theory assumed in economics. Just because SOME people who use TA take into account psychology of human decision making under uncertainty, and behavioral economics also defines CERTAIN behavior of economic actors in terms of psychology DOES NOT mean Behavioral Economics INCORPORATES TA (as the intro previously claimed). You also seem to use behavioral economics and behavioral finance interchangeably -- remember finance is a subset of economics and so is the behavioral inputs to these fields. Finally, you said "TA is part of behavioral finance, a truism that many academics absolutely agree with." I would like to know which academics agree with that statement!!! I can understand an academician agreeing that TA practiced by FEW individuals uses the SAME psychological underpinnings used by Behavioral Finance, but NOT to your statement. The reason, as I mentioned earlier, is that TA is a Empirical Model while NO behavioral model that I know of till date is an Empirical Model (they are all Explicative Models) -- your statement is really comparing apples to oranges. On a separate note, why are you so keen on linking TA and behavioral finance? Does TA need APPROVAL from academicians to exist? I personally don't care if academicians approve of TA or not, as long as I make money using TA! If you are so particular to have a link between the two that will "please" academicians, say something to the effect "Some types of TA and Behavioral Finance both rely on the idea of bounded rationality of human agents". — Preceding unsigned comment added by 14.96.178.4 (talk) 13:26, 21 November 2011 (UTC)

Actually, behavioral economics/finance was started long before Amos Tversky and Daniel Kahneman. Though they made amazing contributions, they were not the founders. The best candidate for that honor is Humphrey B. Neill. RogerBabson (talk) 01:46, 1 December 2011 (UTC)

I get where you are coming from and I also agree that the sentence in the article was not really correct. The quote I thought I had was not present. My point about TA and Behavioral Finance is essentially that, especially chart patterns, are 100% psychologically based, and TA books go to great lengths to explain why they should work, on a behavioral basis. I cannot know what was in Tversky's and Kahneman's minds as they developed BE, but I would be amazed if they were not at least partially led there from TA. As far as my statement about professors, it is from personal conversations. My bugaboo about technicians is that they had the opportunity to be quants and Behavioral Economists, and were too lazy to spend the time to work it out (maybe they were too busy making money). As far as a desire to have TA approved of by BE academics, the Market Technicians Association, which is the professional organization, does work with academia as does the MTA Education Foundation to reverse the misinformation on TA and the (in)efficient markets.Sposer (talk) 01:45, 22 November 2011 (UTC)

[ I have removed this outlandish and irrelevant statement. Even if it is true, it should not be there, but I agree it is factually highly questionable. Incidentally, this whole article reads like a defense of the methodology and an attempt to jsutify it, as opposed to a dispassionate statement of what it is. Nexus501 (talk) 04:13, 17 February 2012 (UTC) ]

I will provide references in the next couple of weeks, but I have spoken to many academics in Behavioral Finance, and many openly acknowledge the connection. Was at a conference yesterday, and multiple quants there agreed that the statement: "much of your work is built on more sophiscated usage of technical analysis tools and methods." Obviously, that is not a reliable source, but not one disagreed.Sposer (talk) 22:15, 17 February 2012 (UTC)

• This content has been removed. While we value and welcome subject-matter experts to participate in editing articles, we do not base encyclopedic content on word-of-mouth, assumptions, or personal convictions outside of reliable and independent sourcing. Additionally, we do not allow ownership of articles by individuals who wish to assert their preferred version of an article bypassing policy, guidelines, and consensus. To this point, you may want to consider a Request for Comment, content dispute resolution, or the Fringe theory noticeboard. In either point, do not restore this questionable content outside of established consensus. Best regards, Cind.amuse (Cindy) 13:24, 18 February 2012 (UTC)

• Further to the edit summary, I clearly stated that I was not using my anecdotal notes as reason to revert. The reason for the revert (beyond the fact that there were grammatical errors, which obviously I could have corrected), is because there are papers and books that state these points as facts. I can point to academics who use TA to prove BF. If you ever looked at quantitative tools, they use rich/cheap analysis (overbought/oversold), moving averages to determine how rich or cheap things are, etc. I know this, because I also worked as a quant and an economist before I was a technical analyst. The tools are the same in many many cases. I will provide the required cites, but do not have the time to search right now, but will in about a week. As for fringe theories, TA is accepted by a large and growing number of academics. And, just to be clear, I have not worked as a technical analyst in many years.Sposer (talk) 22:29, 18 February 2012 (UTC)

• I've gone ahead and offered a list of policies and guidelines on your talk page. It doesn't appear as though you have been properly introduced to the community. Please spend some time reviewing the policies, particularly in regards to reliable sources, edit wars, and adding unsourced or poorly sourced content. It is clear from the dialogue on this page that consensus has not been met. Do not continue to revert the work of others. Users are expected to collaborate with others, to avoid editing disruptively, and to try to reach a consensus rather than repeatedly undoing other users' edits once it is known that there is a disagreement. Further information has been provided on your user talk page. Options are available to you. Continued disruptive editing is not one of those options. Best regards, Cind.amuse (Cindy) 23:35, 18 February 2012 (UTC)

• You should read the policies, not me. I reverted and added a cite, that clearly stated that quants use technical analysis. I have a further cite now, with a WHOLE book that ties behavioral finance to technical analysis. And, if you are going to revert, it would have helped if you corrected the grammar at least. I am following the rules. You are just trying to force your opinion. I am providing sources while you are just saying that you disagree. That is edit warring.Sposer (talk) 00:12, 19 February 2012 (UTC) There was never any consensus that the tie-in between TA and Behavioral and/or Quant was wrong. There were editors that felt it was all out wrong, but there was more a disagreement about the wording, which was substantially altered. What was there earlier was not correct. Somebody then reverted what was there without achieving consensus, which I reverted. Then, I added a reference on quants using TA tools, and that was reverted. That link is here: ^[1]. Further, here is an academic paper that directly states the ties between behavioral finance/economics and TA ^[2]. And there is a whole book on the role of Behavioral Finance in Technical Analysis called "Behavioral Technical Analysis". The two subjects are intertwined and inextricably linked. I understand the points made earlier that TA is predictive, but you will not find a TA book that does not point out that TA works due to psychology and human emotion. The tools Behavior Finance depends on, includes the same tools TA uses. One is not a part of the other, but the basis for both - human emotion and irrationality are one and the same. As for Quants, read any book on quantitative analysis. It is about measuring supply and demand changes via information from the markets. That is technical analysis. Except quants tend to use far more complex statistical and analytical tools, in addition to the ones that they borrowed from TA (such as moving averages, momentum, trend detection, etc.). I know the Wiki rules. I have been editing here for years. Cindamuse is clearly even more experienced than I am, but I suspect she did not read through the whole thread. I have followed all the rules and I am not in any way, shape or form, edit warring. I should also add that it is ironic that the sentence from the Lo book is being used to question the validity of TA. Andrew Lo is a supporter of technical analysis and wrote the book, "A Non-Random Walk Down Wall Street". Sposer (talk) 03:16, 19 February 2012 (UTC)

• The issue here is that there is a current lack of consensus in this article. Rather than engage with the editor, you have chosen to continue reverting content. You additionally add unsourced content stating, "I will provide the required cites, but do not have the time to search right now, but will in about a week." This is inappropriate. Please respond fully to the concerns over article content with the editor above, Nexus501 to discuss reliable and independent sourcing for disputed claims to reach consensus. Once consensus is met, that would be the time to edit the article, as well as providing the citations to support all claims. Pointing to academics and knowledge gleaned from attended conferences and personal background does not meet our guidelines for reliability. Best regards, Cind.amuse (Cindy) 09:19, 19 February 2012 (UTC)

The text that is there now is not grammatically correct. I had changed the text previously and I see now it said before Nexus altered without discussing that Behavioral Finance and Quants incorporate TA. What it should say is that BF and QA incorportate and are built on many of the same tools and theories that TA is built on. The cite that Cindamuze reverted showed that for QA and the ones I noted above shows that for BF. I will put that in next week when I have time. Sorry for posting under an IP, but I am not on my PC. This is sposer. — Preceding unsigned comment added by 24.238.127.242 (talk) 15:55, 20 February 2012 (UTC)

As promised, I have altered the text to more correctly state that TA, QA and BF all use many of the same tools and techniques. I've provided cites, including a full book on the relationship between behavioral finance and TA, as well as a paper describing same. Given that every pattern used by TA is always described based on the psychological and behavioral reason for why it should work, and given that other types of TA, such as Elliott and Dow Theory are 100% described behaviorally and psychologically, it is 100% irrefutable that both TA and behavioral economics and finance are based on the same thing. And, given that quants use many of the same exact measures as technical analysts (and many more complex ones, but still using the same underlying reasoning), it boggles the mind that anybody could question these relationships. I fully understand how a person who incorrectly believes in the validity of random walk or EMH would consider TA, QA or behavioral finance as being invalid, but questioning the noted relationship is illogical.Sposer (talk) 23:04, 25 February 2012 (UTC)

Some interesting additional reading from a quant forum. I know this is not RS, but it should be instructive for those that seem to think that QA and TA are not highly related. http://www.wilmott.com/messageview.cfm?catid=3&threadid=45864.Sposer (talk) 23:18, 25 February 2012 (UTC)

I don't know where to start. They are completely incoherent. What is going on here??? 76.191.143.69 (talk) 04:08, 2 September 2012 (UTC)

Yup, they are unintelligible garbage. Probably intended to disguise the fact that the whole article is about pseudoscientific mumbo-jumbo. Technical analysis doesn't work. AndyTheGrump (talk) 15:42, 2 September 2012 (UTC)

This article is a god-awful mess. The lede is utterly incomprehensible, and violates pretty well every requirement of Wikipedia:Manual of Style/Lead section. The remainder of the article is almost as bad - scattered with poor grammar, jargon, non-sequiteurs and bizarre statements (e.g. "Technical analysts believe that prices trend directionally, i.e., up, down, or sideways (flat) or some combination". What else could a price do? Perform handstands while whistling Colonel Bogey?). I have to conclude that either (a) there is no subject here worthy of an encyclopaedic article, or (b) there is one, but those interested in the subject would prefer that the article be as obscure as possible in order to hide what appears on the surface at least to be self-evident - which is that "technical analysis" is pseudoscientific hocus-pocus if it is anything at all. I suggest that those responsible for this heap of unintelligible gloop do something about it - and soon. AndyTheGrump (talk) 03:27, 3 September 2012 (UTC)

Qoute: "it is still considered by many academics to be pseudoscience". Are there any academics who consider 'technical analysis' to be something other than pseudoscience? What is the balance of opinion amongst those acedemics who are qualified to make such a judgement, and have done so? Simply leaving a statement like that hanging is untenable. If the only academics who have expressed an opinion on the subject do indeed consider the subject to be pseudoscience, Wikipedia:Fringe theories guidelines apply: "When discussing topics that reliable sources say are pseudoscientific or fringe theories, editors should be careful not to present the pseudoscientific fringe views alongside the scientific or academic consensus as though they are opposing but still equal views. While pseudoscience may in some cases be significant to an article, it should not obfuscate the description or prominence of the mainstream views". As to where on the spectrum between 'Obvious pseudoscience', 'Generally considered pseudoscience' and 'Questionable science' (as discussed in the guidelines) the topic falls, it is difficult to say without further evidence. However, since the article states that some academics at least consider the subject pseudoscience, there can be no reasonable doubt that Wikipedia:Fringe theories guidelines need to be taken into account - which this article singularly fails to do. I would remind contributors that there have been several arbitration cases relating to fringe topics over the years, and such matters are taken seriously by the community. As with all the other issues raised in the section above, this clearly needs prompt attention. AndyTheGrump (talk) 13:28, 3 September 2012 (UTC)

The pseudoscience statement does not belong in the article and I am not sure why it is in the article, as that is, at this point, a fringe opinion on TA. I cannot use in the article, but I've spoken to many academics, and there is growing acceptance of technical analysis, probably due to the success of its close cousins, behavioral economics and quantitative analysis. There are 100's of academics that believe that technical analysis (TA) is valid. Andrew Lo, whose work is quoted in the article is among them. Blake LeBaron is another. Didier Sornette has also use TA in his work. The NY Fed has written papers pointing out the validity of some patterns (and has written others that are less positive). The London School of Economics wrote severl papers in the 1990s pointing out how some TA methods led to outsized alpha. For all intents and purposes, quantitative analysis is TA on steroids, and few doubt quant's efficacy. I don't argue that the article needs a good deal of work. There have been multiple poor attempts at either trashing my ill-informed people that think TA is invalid, and equally ill-informed technical analysts that are incapable of writing a complete sentence. The article, however, has necessary cites and TA is most certainly anything but fringe.Sposer (talk) 18:52, 3 September 2012 (UTC)

Wow. I haven't looked at the lede in a long time. This is atrocious. We probably need to go back a year to find what is reasonable.Sposer (talk) 18:54, 3 September 2012 (UTC)

for Mark, who reverted everything I added, the Seeking Alpha article exactly stars that quants use technical tools. In fact that is pretty much the title of the article. The author notes that quants follow trends and use the same tools. That is one if the points the article actually raises. Read on in the article. That is what TA is all about. It also notes, I think I saw, that they use moving averages as well. As for the Capco paper, it exactly says that behavioral finance jumped into the fray after technical analysis and attempts to explain why TA patterns might work. That is on the first page of the paper. Do not like is not a good enough reason to revert. Sposer (talk) 00:51, 4 September 2012 (UTC)

Regarding the academics you have 'spoken too', I somehow doubt that we will accept that as a citation - we need published works. And as for "quantitative analysis [being] TA on steroids", unless this article (or at least, what I can make of it) is wrong, or our Quantitative analyst article is wrong, they are very different beasts: "A typical problem for a statistically oriented quantitative analyst would be to develop a model for deciding which stocks are relatively expensive and which stocks are relatively cheap. The model might include a company's book value to price ratio, its trailing earnings to price ratio, and other accounting factors. An investment manager might implement this analysis by buying the underpriced stocks, selling the overpriced stocks, or both...". Rather different from the "Market action discounts everything" principles expounded here, at least to my non-expert eyes. Still, if you can find a reliable source that supports "quantitative analysis [being] TA on steroids", then by all means cite it in the article. AndyTheGrump (talk) 23:28, 3 September 2012 (UTC)

I am not looking for you to accept that as a cite, because it is not. I am just trying to teach here. I did mention multiple sources though, but listing me is of no value anyway. I am just letting you know what the industry says and does.Sposer (talk) 00:53, 4 September 2012 (UTC)

'What the industry does' has no bearing on whether academics describe TA as pseudoscience. AndyTheGrump (talk) 02:21, 4 September 2012 (UTC)

(non-english native speaker writing) Sposer&Andythegrump, I read with great interest your arguments and It seems to me that you do not disagree so much. While it is true that Andrew Lo's paper states that "several technical indicators do provide incremental information and may have some practical value", it also says that "informativeness does not guarantee a profitable trading strategy". As an academic myself I conducted some (randomized) tests with simple TA indicators and my conclusion is compatible with that: a fair ROI is indeed attainable under some strong constraints on the fractional Brownian motion generator. BUT these results do NOT include broker fees, which practically make these gains disappear. To summarize, TA MIGHT bring some usable information theoretically, but practically the profitability is not proved. As a matter of fact, TA perfectly meets the definition of a heuristic (see the related article), but not of a science as used in the academic vocabulary. Anyway its sensibility to (too) many parameters makes its (best) profitability very low even for skilled people, thus obviously negative for the others. --Scoulondre (talk) 16:19, 5 January 2013 (UTC)

Thanks for the comment. The point I was making is that it is not pseudoscience and it is misleading to describe it as such. Lo's work mentions that some in academia suggest it is, but it is far from unanimous. Others in academia have written articles showing profits that are economically significant if I remember correct. Look for some older work from the London School of Economics, the Fed, Blake LeBaron and Didier Sornette amongst others. Much of electronic market making and quant is really just TA on steroids (I know since I've done both), although the quants don't like to admit it. Bottom line is I do neither quant nor TA anymore and have no skin in the game any longer and do not have the time to really edit this piece, but pseudoscience is an incorrect and misleading lie.Sposer (talk) 20:19, 5 January 2013 (UTC)

If this article is to make claims asserting scientific credibility for Technical Analysis, it will need to cite sources which back this up. Neither blogs, nor 'Journals' produced by consulting firms are likely to meet the standards required, per WP:RS policy. AndyTheGrump (talk) 02:38, 4 September 2012 (UTC)

User:Sposer just restored a sentence to the lede: " Behavioral economics and quantitative analysis use many of the same tools of technical analysis". I had removed this sentence in its previous form (" Behavioral economics and quantitative analysis build on and incorporate many of the same tools of technical analysis") because the sources given do not support that assertion and because, well, because it's simply false (Behavioral economies most certainly does not "incorporate" or "build on" technical analysis, perhaps vice versa).

Sposer's edit summary was: Given that sources almost exactly stated what was in sentence, reverting. Will soften text momentarily however.. This isn't true (and it would be weird if four different sources stated exactly that). And in fact, the sources do not even support the milder wording.

One by one:

Seeking Alpha - first, this is a blog more or less so doesn't meet WP:RS. Still, the word "behavioral" does not appear in the article (only in comments) hence the assertion that behavioral economics uses many of the same tools as technical analysis is NOT supported by this source. The word "quantitative" occurs once in the article, basically saying that "quantitative strategies" involve looking at past trends. It doesn't say anything about quantitative analysis building on the tools of technical analysis. Hence this source does not support the sentence at all, even if we do ignore reliability issues.

Mizrach and Weerts - this appears to be a working paper which runs into WP:RS issues. And also again, the source simply does not support the sentence. Yes, it does talk (and define) what behavioral economics is, and it does talk (and more or less define) what technical analysis is but nowhere does it state that one builds upon or incorporate the other. If I'm missing where it is supposed to do that please provide a quote and page number.

Capco - again I'm not 100% sure that this can be considered a reliable source, though it does have some academics on its editorial board. Anyway, once more, the article talks about "behavioral finance", it talks about "technical analysis" but it does not say that one builds upon or incorporates the other. If I'm missing where it is supposed to do that please provide a quote and page number.

The last source is a book and judging by the title maybe it does support the claim. However, without a page number it's impossible to verify and I'm not going to read the whole thing. The burden of proof is on the person inserting the text to provide the page number.

There are some additional problems here.

First, there is a bit of a definition confusion in regard to the word "quantitative" can mean pretty much anything involving numbers, as the wlink to quantitative analyst indicates. In fact these terms can be equivocated and using "quantitative" does not add to the article.

Second, and more importantly, even if you can find a source or two which makes the claim above that does not imply that this view is well established. Essentially, while some technical analysts may believe that the behavioral economics are building upon their work, they're not. Even the converse statement - that technical analysts are building upon the work of behavioral economists is not really true. Basically, behavioral economists for the most part regard technical analysis as the same kind of mumbo-jumbo that the more traditional "efficient market hypothesis" see it as (in fact Becon is not necessarily conflict with some forms of EMH). The sentence which is being included is a very strong (and essentially false) claim and hence really needs some very high quality sources to back it up. Right now it has no sources which really back it up. VolunteerMarek 05:45, 4 September 2012 (UTC)

I removed the "build and incorporate" portion as I believe that was too strong as well. The articles cited do not each validate all of the statements. However, they either support the statements about Behavioral Economics or Quants. They specifically refer to use of things like moving averages, or explaining TA terms, such as channels and support and resistance. There is certainly no attempt to state that behavioral economics makes any attempt to validate TA. I worked as a quant and later shifted to TA (and now am involved with neither). Quants do rich/cheap analysis often by measuring things like moving average of price expected price (i.e., something can remain rich or cheap for longer than you can afford to hold a position). These are exactly what technicians may use, but just on price. The lede is suggestive that there is an overlap, which there clearly is. You will not find a whole lot of academic work stating that, largely because there is no reason to do it. It is industry practice. Again, I don't mean for this to be meant as a cite, but just stating observations over the years. As for Seeking Alpha, blogs are okay, in some cases. SeekingAlpha is a widely read blog and is often used as a source in the financial press. I am just trying to get us back to a point where the lede is intelligible and largely correct. It might be that the info on quants and behavioral economics belong elsewhere in the article. But, they are valid points. I am happy to consider some movement around. We certainly should state that TA's validity is questioned by many academics, and that, like fundamental, quant and behavioral analysis, flies in the face of EMH. However, if you want balance, you need to point out that there are many academics that support it as well.Sposer (talk) 17:22, 4 September 2012 (UTC)

Ok, look, I don't know what "quantitative analysis" is supposed to mean here - the linked article mentions people like Merton, Black, Scholes, Engle and Fama, all of whom are very "mainstream" finance/econ dudes who don't do anything resembling TA, just use "quantities", i.e. math - but in regards to behavioral economics, the claim "Behavioral economics and quantitative analysis use many of the same tools of technical analysis" is simply false and NOT SUPPORTED by any of the source given. Yes, those sources discuss Becon, and TA but none of them say that they use the same tools. I am removing this claim until a source which actually supports it is provided.VolunteerMarek 07:26, 6 September 2012 (UTC)

I don't understand what you are missing. The Capco paper directly states the cognitive explanation for technical channels. Cognitive/psychological = Behavioral: "It should be pointed out that certain market practitioners, the so-called technical analyst ornchartists, never paid any attention to the results of mathematical finance and EMH that are against the very grain of their work. These practitioners believe that certain price patterns repeat themselves and provide profit opportunities. Consequently, they pore over historical data and draw charts with acronyms such as “support,” “resistance,” “channel,” “head-and-shoulder,” and “momentum,” which according to EMH have no informational value whatsoever, in order to gain insight into market sentiment that hopefully will give them a trading edge. Justification of chartists for their approach to market is very intuitive and suffers from

a lack of quantification though they use certain statistical terms such as moving averages or ratios. To justify some of these approaches psychologists have joined the foray and tried to provide an explanation for the way market behaves using psychology. Figure 1 is a cognitive psychology explanation of oscillation of prices that fall into a rising or falling band called a “channel.” The Seeking Alpha story title: "Beating the Quants at Their Own Game" relates how both quants and technical analysts both use moving averages for investing/rich/cheap decisions: "Many quantitative investment strategies are based on some sort of trend following - very simply put they buy an uptrend and sell a downtrend. The “trend” is typically determined by a moving average. For the sake of this analysis I will be dealing with simple moving averages as opposed to exponential moving averages due to the fact that I was not prepared to spend my whole weekend creating the necessary calculations in Excel. The general take-away of this exercise will be the same for either. A simple moving average is the average price of the last “X” number of days. Popular moving averages used in technical analysis are the 50 day, 100 day, and 200 day. A technical investor wants a signal that is clear enough that they will not miss a big portion of the price move but also slow enough that they will not get whipsawed around from trading “noise”." The SSRN article points out that behavioral researchers and technical analysts focus on high and low prices: "Psychological, behavioral, survey and experimental evidence appears to support our choice of simple, widely reported, and graphically oriented rules like the n-day high and low." Graphically = Technical = Chartist. I am honestly confused what you are missing? I very much watered down the lede, and did not put it as same building blocks, although that is arguable, and rather said they use the same tools/indicators, as clearly stated with three different examples (highs and lows, moving averages, channels) in three cites.Sposer (talk) 03:07, 7 September 2012 (UTC)

Please find a source that states explicitly that "Behavioral economics and quantitative analysis use many of the same tools of technical analysis". You are engaging in WP:OR. AndyTheGrump (talk) 03:49, 7 September 2012 (UTC)

How is it OR when the whole Seeking Alpha article is about TAs using the same tools as Quants. That is even the title. There is no OR in what I said. The words there are synonyms. If it says in one sentence about technicians use n-day highs and lows and in another psychological explanations of focus on highs and lows, that is not OR. That is English. Same for the direct statement about technicians and quant using moving averages. And, in the Capco piece it directly states the psychological explanation for the TA channel. Technical analysts specifically state that they believe their patterns are based on crowd behavior. Same thing. No OR. Period. If you do not know the nomenclature, I guess I could see how you could miss this, but this is as far from OR as Earth is from Pluto. Sposer (talk) 04:00, 7 September 2012 (UTC)

There's no way to state it more clearly - the sources DO NOT support the claim the text is making. In all of the passage that you are quoting above there is NOTHING which would support the contention that Behavioral economics or quantitative analysis (whatever that is in this context) use many of the same tools of technical analysis. Moving averages are just averages, so this is basically like saying that because both TA and Be and quant use these magical things called "numbers", they both "use the same tools".

And "cognitive" is a particular word, while "Behavioral finance" is a very specific discipline. The OR is in you jumping from one to the other.

At this point this has become an instance of WP:IDIDN'THEARTHAT which is turning into a slow moving edit war.VolunteerMarek 05:58, 7 September 2012 (UTC)

Actually it is more like youdon't like. Cognitive relationships are part of behavioral finance. Moving averages and momentum are used by quants and technical analysts and are specifically mentioned either in the cites or in the additional materials I put in. A moving average is not just a number. You apparently do not understand what is meant by a tool (I do not mean this in a disparaging or argumentative way). Technical analysts and quants both use moving averages in the exact same ways. They use it to help identify a trend, or how far a price is from the norm. Again, not RS, but I started out as a quant, and used many of the same things I used later on as a technical analyst. The book noted also directly said that they use the same thing. I know what Behavioral Finance is. BF is based on the psychology of the markets. So is technical analysis.Sposer (talk) 16:33, 7 September 2012 (UTC)

Unsourced, so irrelevant. AndyTheGrump (talk) 17:45, 7 September 2012 (UTC)

I am trying to help you guys not appear so ignorant and explain the world of quants, behavioral analysts and technical analysts. Yes, my experience is anecdotal, even if it is what everybody else does. People don't write papers saying: "Hey, what I do is exactly what the guy who doesn't have a PhD does, and by the way, I actually stole his idea." Surprisingly, though for some reason there is blindness here, the sources in the article and the additional five or so I noted last night in the talk section actually do EXACTLY say this, and use proper English and apply synonyms in some case so they don't use the same word over and over again. If you are talking about the moving averages statements, you are just plain wrong. The moving averages part is not unsourced, but rather need not be sourced. The article does not need to explain how moving averages are used as that is not what the article is about. That is common knowledge and probably exists in articles on them. Plus, I think it was mentioned in context in one of the sourced pieces. I suggest you try to understand using words in context. A moving average is never considered just a "number" in TA or quants. It is calculated as part of a methodology and for trading systems. For example, "moving average cross overs", etc. Your saying the moving average usage being unsourced is like saying that in an article about the history of Disney, that I mentioned Pluto, and I would need a source to say Pluto was dog Disney character and not the planet. It is understood in context.Sposer (talk) 19:28, 7 September 2012 (UTC)

The Seeking Alpha source (which is of questionable value as WP:RS anyway) describes how some investors that primarily use other strategies may sometimes use the 'tools' of TA. It does not in any way support a definitive and unequivocal claim on the lede that "Behavioral economics and quantitative analysis use many of the same tools of technical analysis". Incidentally, there seems to be a little confusion in terminology here. By 'tool', do we mean the charts themselves, or algorithmically-based trading systems? The former is a means to visualise data, while the latter is a decision-making system. It is entirely possible to 'use' a chart in the sense of looking at it to get a better understanding of data, and then, based on other information, ignore its implications. Does this count as 'Using the tools of TA'? AndyTheGrump (talk) 04:32, 7 September 2012 (UTC)

Technical analysts look at charts. Their tools may include that visualization, but it is much more than that. They write indicators that measure momentum and price direction. Technical analysts also write trading systems as well. When I was one, I wrote systems that were purely technical, measuring momentum with cubic splines, and other mathematical tools. Regardless,here is more evidence: In "Behavioural Technical Analysis": "I examine the behavioural finance concepts supporting three strategies which technical analysts have utilised over the years. The three strategies are extreme prices, trend following, and support and resistance. I chose those strategies because they are well supported by the evidence and offer good prospects for profitable trading in securities." (page xiii) He also states that some put quants as part of fundamental analysis, though techncial analysts point out they quants are just using their tools. That is not good enough, because clearly that is what technicians have said (although, again not acceptable for the article, but I have worked as a quant, with quants, and with finance professors who have said exactly the same thing). Here is a blog that points out they use the same things: http://jflennon.wordpress.com/2010/01/07/quantitative-analysis-vs-technical-analysis/. Finally, this paper states: "it should be kept clear that technical analysis due to its visual and qualitative nature still plays a central role in professional trading and investment, and provides a main source of empirical inspirations to the development of quantitative analysis.", which is actually more in line with the stronger idea that TA is at the core of quant (and BF), and which I removed and have no intent of adding back. Sposer (talk) 05:29, 7 September 2012 (UTC)

This is all irrelevant OR. The given sources simply do not support the claim.VolunteerMarek 05:58, 7 September 2012 (UTC)

The text was not removed due to the content. It was due to the fact that nobody has any idea what you are trying to say. I read the text multiple times. I am a former technical analyst and a former quant, and I have no idea what you are trying to get across. There were some things in there that I think are points I've been trying to get across as well, but I am not even sure. As far as forecasting, I am not sure what you are getting at. However, TA most definitely attempts to model expectations for future prices or trends, and some types of TA absolutely do attempt to forecast and time future prices and price turns. If you are trying to say that is not possible, you are not alone, but that was not clear either. If you are saying TA does not attempt to do that, you are incorrect. Sposer (talk) 19:45, 10 September 2012 (UTC)

Dear Sposer, regarding forecasting, which I'm trying to say, based on both:

- Writings made ​​in recent decades by authors such as Mark Douglas, Alexander Elder, Scott Patterson (Quants), Larry Williams, Mandelbrot, Mark Tier, etc;

- In the history of several crashes that occurred in the last 25 years,

- In the testimony and in the history of famous Markets practioners, as Ed Thorp, Nassim Taleb, Victor Niederhoffer and George Soros

- And in my own experience, as individual trader in the market,

is that:

whether by following the signs indicated by a trading system, or contrary to them (practicing the technique of "fading")

TA (as well as other forms of analysis) is no longer used as a forecasting tool in strict sense of the word "forecasting" (what almost certainly WILL be), but it has been increasingly used as a tool of probabilities (what are more likely or not to happen) - with all procedures relating to the risk taking and protection, that it implies

And I strongly believe that this subtle difference, however obvious or implicit, and therefore perhaps unnecessarily, it may seem to those who know the subject, should be emphasized to the countless people who have their first contact with the subject, through this article.

Hoping to count with your support to make this point as clear as possible,

best regards 189.62.16.113 (talk) 17:09, 11 September 2012 (UTC)

Thank you for responding. Firstly, I recommend you read the Wikipedia:Manual of Style/Lead section. Note in particular that the article lead section is supposed to summarise material which is discussed in greater depth in the body of the article. If it isn't discussed there, it shouldn't be in the lede. Note also that we discourage excessive citations in the lead - they are unnecessary if the material is covered later, where the citation is more appropriate.

As for your issues with the term 'forecasting', you need to understand that your "own experience, as individual trader in the market" is not relevant as far as Wikipedia is concerned - article content needs to be based on published reliable sources. I'd assume that you are correct about 'forecasting' being about 'probabilities' though - as I'd hope the article would state anyway. Even the most ardent supporters of TA don't seem to suggest that it is right all of the time. Maybe the article needs to be clearer about this.

AndyTheGrump, I mentioned my own experience in the same sense that Sposer mentioned his own. Obviously, both for the purpose of the article, as to the rules for this environment, I agree on this point. 189.62.16.113 (talk) 22:02, 11 September 2012 (UTC)

Finally, I think we need to address the issue raised by Sposer, and previously by others in edit summaries. English is clearly not your first language, and the material you added simply wasn't comprehensible. It is no use trying to edit an article if others cannot understand what you are trying to say. I suggest that rather than editing the article directly yourself, you provide the necessary cites etc here, and ask others to include material in an appropriately-written and understandable manner. AndyTheGrump (talk) 17:43, 11 September 2012 (UTC)

Regarding to the concordance about the term "forecast" be better replaced by "estimation of probabilities" or so, to avoid confusion by people who aren't familiar with the subject; for a long time I also hoped that this be corrected somehow, making the article clearer about it, right from its lead section.

However as this hasn't yet occurred, I then decided edit to renew the debate.

Anyway, for now on I hope that any misunderstandings have been cleared up, and that we can work together to correct this flaw, that in my view can really undermine the credibility of the article by unvoluntarily reinforce old prejudices and biased practices generally assigned to TA

Thank you 189.62.16.113 (talk) 22:02, 11 September 2012 (UTC)

Does TA normally produce an "estimation of probabilities" as a numerical value? The article as it stands doesn't seem to suggest so. AndyTheGrump (talk) 23:15, 11 September 2012 (UTC)

Not exactly. Estimation of probabilities related to the price and volume levels of some financial assets (although TA is still and widely misused outside its scope), more as reference points, which through TA can be visually identified more easily as most likely (or not) to happen, so that (when and) if confirmed, can be used by traders to open and/or close positions.

Indeed, I don't know if the term "estimate/analysis of probabilities" would be the one more appropriate for describing the using of TA as a method of analysis of competing hypotheses applied to markets and assets (liable to be efficiently analyzed by TA). Which (by the references mentioned above), in recent decades has proved the best, if not (as far as known by now, the) only way to efficiently use not just TA, but any form of analysis of assets without incurring in big financial risks, be individual bankruptcies or systemic (by financial contagion).

189.62.16.113 (talk) 01:04, 12 September 2012 (UTC)

Thanks. I do agree on the probabilities statement, but that was not clear at the time. There has been work with the idea of a proability, and when we write trading systems, and there might be cites for that, nobody expects to be correct all the time. You do typically test and see likelihood of an indicator or suite of indicators working. There is also definitely been a great deal of wrk done (whole books) that show how often a given pattern works (including by the Fed's economists and others). This is almost certainly in the Kirkpatrick book.Sposer (talk) 09:50, 12 September 2012 (UTC)

More than 3 months have passed, more than enough time to both evaluate necessary changes as its bibliography, so I put down my amendment about the definition of the term:

"Technical Analysis is a heuristic tool used by both professional as amateurs traders for acting over price movements of some financial instruments, with the purpose of profit by buying or selling them, trying identify best possible points for entry or exit in a trade.[1][2]

It is also interpreted both as a form of opinion research, [3] where the trend lines and other visual or statistical patterns are perceived as "photos" of the behavior of most market participants at any given time; [4] as well as a form of probability analysis based on the idea that prices, since they are reflections of cognitive biases of the crowds, would move according to recurrent and identifiable patterns.[5]

And that although it is impossible to forecast when and to what degree these patterns will recur in the future (due to the fact that financial markets are social environments), as well as be impossible in the moments which negotiations are occuring distinguish real signs of such patterns from false alarms,[6] is fairly possible to traders take advantage of this heuristic tool, provided One knows its limitations added to a rigid risk control.[7]"

Numbers in brackets indicate references (one or two at each point) to be added.
I'm open to suggestions, reminding that the biased character of the supposedly predictive characteristic of this tool, will begin to be corrected in its definition section, but should be extended to the whole article to avoid the current tendentious aspect of this article.
189.121.168.62 (talk) 04:55, 24 December 2012 (UTC)

Unfortunately, it seems the person who left this excelent bibliography of reference above, also seems to have forgotten or lost the disposition to implement the changes proposed.

Necessary Changes BTW!

For example, I made a Ctrf + F research in this article for the word "forecast" and came and eleven!!! results.

Definitely this article can not continue like this. So, I support the proposed changes and I don't see any problem in the proposed opening text above. It is longer than the current, but nothing that can't be improved, besides, more than size what matters is the accuracy.

187.38.111.157 (talk) 04:18, 25 December 2012 (UTC)

If you "don't see any problem in the proposed opening text above", can I suggest that you leave editing articles in the English-language Wikipedia to people with proficiency in the language - it is an ungrammatical mess, and entirely unacceptable as content. AndyTheGrump (talk) 05:08, 25 December 2012 (UTC)

It's mess, true; but if someone thought the content was heading in a good direction they could edit the language easily enough. Dicklyon (talk) 05:14, 25 December 2012 (UTC)

Possibly, if (a) it was clear what was intended, and (b) the sources being cited for the content were actually given. I get the impression that this is the 'write first, and then find sources to back it up' editing that this article has suffered from before. There is a long history of IPs contributing almost incomprehensible WP:OR to this article (see for example ), and adding more in the hope that someone will sort it out later just isn't acceptable. I suspect, given the fact that the IP responsible for the earlier incomprehensible edit I linked was from Sao Paulo, Brazil, like the current one, that it is the same individual, who simply isn't capable of writing in English to the degree required - and perhaps more to the point, isn't capable of understanding why their edits are problematic. It is entirely reasonable to make allowances for contributors who don't have English as a first language - but only to the extent that it doesn't make a nonsense of our articles. This is a difficult subject, and it needs careful editing, based on a clear understanding of appropriate published reliable sources, and of Wikipedia policy regarding how such sources are used. Without this, the article will revert back to the mess that it has been in the past. AndyTheGrump (talk) 06:34, 25 December 2012 (UTC)

That makes more sense than attacking the poor writing skill of the editor. Dicklyon (talk) 06:40, 25 December 2012 (UTC)

Stating the self-evident isn't an 'attack', and nor does it lack sense. The IP seems still to fail to understand what the problem is with their contributions, and bogus obfuscation wouldn't make it clearer. If someone is incapable of communicating in the relevant language, it isn't in anyone's interest to pretend that they can. AndyTheGrump (talk) 07:27, 25 December 2012 (UTC)

Well, what is "self-evident" to some, for others it may be simply considered absence of arguments or selective ones (for example, the "'write first and then find sources to back it up' editing" way, it seems to be one of main problems of the present version), not to mention that try to emphasize an ad hominem reduction to close the question don't help nothing...

Also, history and everyday life is full of examples regarding problems of language even among natives of an same language used to selectively ignore issues, use double standards or itimidate impressionable people.

Anyway, in order to not make this too long and considering the good faith of most people, and not lose the focus here, for each one, what aren't clear in proposed paragraphs?

177.33.159.133 (talk) 14:43, 25 December 2012 (UTC)

(a) The meaning. (b) The source being cited. AndyTheGrump (talk) 18:37, 25 December 2012 (UTC)

Ok, first thank you Dicklyon and 177.33.159.133 and for your patience

Now, let's work piece by piece to see if we got some progress

What especifically in the 1st paragraph you didn't understood ?

I split it here:

I - Technical Analysis is a heuristic tool used by both professional as amateurs traders for acting over price movements of some financial instruments,

II - with the purpose of profit by buying or selling (short) them,

III - trying identify best possible points for entry or exit in a trade. ---- Bold letters would be wiki links

189.121.172.45 (talk) 15:12, 26 December 2012 (UTC)

This is not written in grammatical English. It is entirely unacceptable as article content - and would add nothing but platitudes to the article if it were corrected. You clearly lack the skills necessary to edit an English-language encyclopaedia. If it is added to the article, I will revert it. That is all I have to say on the matter. AndyTheGrump (talk) 15:32, 26 December 2012 (UTC)

AndyTheGrump, as noted by other users, ad hominem remarks, personal attacks, and empty threats don't add or contribute with anything, so I'll ignore your troll, cabal, negative, counterproductive, desperate, (racist?) behavior

Anyone else? 189.121.172.45 (talk) 16:31, 26 December 2012 (UTC)

User:189.121.172.45, please assume that other editors are acting in good faith or risk being reported to an administrator and blocked. More to the point, User:AndyTheGrump's assessment of the material you offer is accurate. --CliffC (talk) 01:53, 28 December 2012 (UTC)

For the benefit of others reading this, please note that 177.33.159.133 and 189.121.172.45 both geolocate to Sao Paulo, Brazil. I see no particular reason to assume that they aren't the same person, in spite of 189... attempting to imply otherwise. Or has technical analysis suddenly become the hot topic of the day in Sau Paulo? AndyTheGrump (talk) 02:12, 28 December 2012 (UTC)

• Sao Paulo is the seventh largest city in the world,
• its Stock Exchange is the largest in Latin America,
• I have no idea how many people from English speaking countries live/work now in Sao Paulo, or somehow deal with the financial markets (local or abroad), but I suppose not a negligible number, as well as their variety in the use of English, of Australians to Nigerians

These are Facts

If others prefer to appeal to the emotions, to the hysteria, to the disruptive behaviors, empty threats, jump to conclusions instead of arguing about the topic covered, this it only made points against them, not me!

189.121.163.149 (talk) 23:29, 28 December 2012 (UTC)

BTW, CliffC - There is no accuracy in statements like "because I said so" 189.121.163.149 (talk) 23:39, 28 December 2012 (UTC)

Per WP:COMPETENCE you clearly lack the necessary skills to edit an English-language encyclopaedia. If you edit the article in the manner you propose above, I will revert it. There is nothing more to be said here. AndyTheGrump (talk) 00:07, 29 December 2012 (UTC)

As I said before "because I said so" isn't an argument for anything.

Well, for who didn't have anything else to say up there, you still down here quite wordy, without substance avoiding argue the subject, but I guess isn't possible to require individuals what they can not afford to offer...

189.121.163.149 (talk) 01:22, 29 December 2012 (UTC)

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The Technical analysis software article was recently trimmed down, removing some spammy links. See activity at WP:COIN It's now so short it could just be a paragraph here. Any objections to merging? John Nagle (talk) 05:27, 12 August 2017 (UTC)

This edit request by an editor with a conflict of interest has now been answered.

Here are some proposed minor edits for this page:

• Change the “Industry” section so it does not say “Market Technicians Association” but “CMT Association” as the company has gone through a name change.
• Fix any incorrect links at the bottom. The new company website for information is cmtassociation.org

Tyler wood (talk) 13:38, 16 August 2017 (UTC)

 Done. ~Anachronist (talk) 16:43, 16 August 2017 (UTC)

This article is clearly biased. The introduction has a single sentence concerning what technical analysis is actually about, and then three sentences concerning objecting and competing methods. Furthermore, these other methods are presented as being more factual or reliable, despite the fact that the efficient-market hypothesis and active management theory are both unproven. I don't understand why there is such a concerted push to give this article a negative slant considering that trading would essentially be impossible without technical analysis, and it influences every single market considering that most price-action these days is driven by bots which act almost entirely upon TA signals. High-frequency trading, which makes the majority of trading volume in the US stock market and certainly in the crypto market, is entirely driven by TA.

The claim that TA is 'pseudoscience' is written by someone who lost a large amount of money in the dot-com bubble and according to this talk page has been up for, what, a decade now, and nobody is allowed to alter or remove it? Or even give it some context, or perhaps a differing perspective? In the introduction for the topic!? The defining aspect anyone who reads this article will be the implication that this is pseudoscience and therefore nonsense, and this all hangs upon one book written by somebody who is clearly going to be personally biased against the concept of trading itself.

I have tried to give that quote some further context considering that studies done on TA have been done in the abstract and do not actually reflect applied circumstances but it has been reverted twice. TA in the real world is not done in isolation, as the studies are conducted, but TA signals are used in conjunction with one another to construct a heuristic understanding of -price action-, which traders, and bots, then act upon if the risk to reward ratio is favourable. You cannot gain an accurate understanding of TA by running statistical analyses on individual signals without any context for how entities act upon those signals and then conclude that the method is nonsense. This article's introduction, the thing most people will read when looking up TA for the first time, is terribly biased and needs to be reconsidered. It should be rewritten with an emphasis on what TA actually is and how it is applied in markets rather than a emphasis on how other theories disagree with it. Hueycookafew (talk) 09:37, 23 July 2021 (UTC)

We can't use WP:SYNTHESIS to undercut the reliable sources (I use the plural because although we cite only one in the read, others are references further down in the article). Lots of things are widely used and studied but are still pseudoscience - Homeopathy, for example. This 'TA in the real world' stuff is a red herring. If the signals don't work, and you combine with something else that does work (for example, the overall upward trend of the stock market), you'll still see some benefit overall. But that does not mean that TA actually contributed anything. There is some legitimate work that gets done in studying behaviors in the stock market, but that work doesn't justify the large volume of pseudo scientific techniques in the field, just like the fact that counting calories works doesn't justify fad diets. MrOllie (talk) 11:08, 23 July 2021 (UTC)