Technical analysis

There are two primary methods used to analyze securities and make investment decisions: fundamental analysis and technical analysis. Fundamental analysis involves analyzing a company’s financial.

QuantShare specializes, as the name suggests, in allowing Quantitative Analysts the ability to share stock systems.

Technology to improve your trading

MetaStock has been providing award-winning charting and analysis tools for the self-directed trader for over 30 years. Capitalizing on technical analysis, our line of trading software and market data are designed for active traders of all levels so they can backtest, scan and analyze .

A technical analyst therefore looks at the history of a security or commodity's trading pattern rather than external drivers such as economic, fundamental and news events. It is believed that price action tends to repeat itself due to the collective, patterned behavior of investors. Hence technical analysis focuses on identifiable price trends and conditions. Based on the premise that all relevant information is already reflected by prices, technical analysts believe it is important to understand what investors think of that information, known and perceived.

Technical analysts believe that prices trend directionally, i. The basic definition of a price trend was originally put forward by Dow theory.

A technical analyst or trend follower recognizing this trend would look for opportunities to sell this security. AOL consistently moves downward in price. Each time the stock rose, sellers would enter the market and sell the stock; hence the "zig-zag" movement in the price. The series of "lower highs" and "lower lows" is a tell tale sign of a stock in a down trend. Each time the stock moved higher, it could not reach the level of its previous relative high price.

Note that the sequence of lower lows and lower highs did not begin until August. Then AOL makes a low price that does not pierce the relative low set earlier in the month. Later in the same month, the stock makes a relative high equal to the most recent relative high. In this a technician sees strong indications that the down trend is at least pausing and possibly ending, and would likely stop actively selling the stock at that point.

Technical analysts believe that investors collectively repeat the behavior of the investors that preceded them. To a technician, the emotions in the market may be irrational, but they exist. Because investor behavior repeats itself so often, technicians believe that recognizable and predictable price patterns will develop on a chart.

Technical analysis is not limited to charting, but it always considers price trends. These surveys gauge the attitude of market participants, specifically whether they are bearish or bullish.

Technicians use these surveys to help determine whether a trend will continue or if a reversal could develop; they are most likely to anticipate a change when the surveys report extreme investor sentiment. And because most investors are bullish and invested, one assumes that few buyers remain. This leaves more potential sellers than buyers, despite the bullish sentiment. This suggests that prices will trend down, and is an example of contrarian trading. Chan have suggested that there is statistical evidence of association relationships between some of the index composite stocks whereas there is no evidence for such a relationship between some index composite others.

They show that the price behavior of these Hang Seng index composite stocks is easier to understand than that of the index. The industry is globally represented by the International Federation of Technical Analysts IFTA , which is a federation of regional and national organizations. Professional technical analysis societies have worked on creating a body of knowledge that describes the field of Technical Analysis. A body of knowledge is central to the field as a way of defining how and why technical analysis may work.

It can then be used by academia, as well as regulatory bodies, in developing proper research and standards for the field. Technical analysis software automates the charting, analysis and reporting functions that support technical analysts in their review and prediction of financial markets e. Since the early s when the first practically usable types emerged, artificial neural networks ANNs have rapidly grown in popularity.

They are artificial intelligence adaptive software systems that have been inspired by how biological neural networks work.

They are used because they can learn to detect complex patterns in data. In mathematical terms, they are universal function approximators , [36] [37] meaning that given the right data and configured correctly, they can capture and model any input-output relationships. As ANNs are essentially non-linear statistical models, their accuracy and prediction capabilities can be both mathematically and empirically tested.

In various studies, authors have claimed that neural networks used for generating trading signals given various technical and fundamental inputs have significantly outperformed buy-hold strategies as well as traditional linear technical analysis methods when combined with rule-based expert systems.

While the advanced mathematical nature of such adaptive systems has kept neural networks for financial analysis mostly within academic research circles, in recent years more user friendly neural network software has made the technology more accessible to traders.

However, large-scale application is problematic because of the problem of matching the correct neural topology to the market being studied. Systematic trading is most often employed after testing an investment strategy on historic data. This is known as backtesting. Backtesting is most often performed for technical indicators, but can be applied to most investment strategies e.

While traditional backtesting was done by hand, this was usually only performed on human-selected stocks, and was thus prone to prior knowledge in stock selection. With the advent of computers, backtesting can be performed on entire exchanges over decades of historic data in very short amounts of time.

The use of computers does have its drawbacks, being limited to algorithms that a computer can perform. Several trading strategies rely on human interpretation, [41] and are unsuitable for computer processing.

John Murphy states that the principal sources of information available to technicians are price, volume and open interest. However, many technical analysts reach outside pure technical analysis, combining other market forecast methods with their technical work. One advocate for this approach is John Bollinger , who coined the term rational analysis in the middle s for the intersection of technical analysis and fundamental analysis.

Technical analysis is also often combined with quantitative analysis and economics. For example, neural networks may be used to help identify intermarket relationships.

Investor and newsletter polls, and magazine cover sentiment indicators, are also used by technical analysts. Whether technical analysis actually works is a matter of controversy. Methods vary greatly, and different technical analysts can sometimes make contradictory predictions from the same data. Many investors claim that they experience positive returns, but academic appraisals often find that it has little predictive power.

Technical trading strategies were found to be effective in the Chinese marketplace by a recent study that states, "Finally, we find significant positive returns on buy trades generated by the contrarian version of the moving-average crossover rule, the channel breakout rule, and the Bollinger band trading rule, after accounting for transaction costs of 0.

An influential study by Brock et al. Subsequently, a comprehensive study of the question by Amsterdam economist Gerwin Griffioen concludes that: Moreover, for sufficiently high transaction costs it is found, by estimating CAPMs , that technical trading shows no statistically significant risk-corrected out-of-sample forecasting power for almost all of the stock market indices.

In a paper published in the Journal of Finance , Dr. Technical analysis, also known as "charting", has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression , and apply this method to a large number of U.

In that same paper Dr. Lo wrote that "several academic studies suggest that Thomas DeMark 's indicators enjoy a remarkable endorsement in the financial industry. Market entry signals have been tested by comparing conditional returns i.

For the period from Jan. The efficient-market hypothesis EMH contradicts the basic tenets of technical analysis by stating that past prices cannot be used to profitably predict future prices. Thus it holds that technical analysis cannot be effective. Economist Eugene Fama published the seminal paper on the EMH in the Journal of Finance in , and said "In short, the evidence in support of the efficient markets model is extensive, and somewhat uniquely in economics contradictory evidence is sparse.

Technicians say [ who? Because future stock prices can be strongly influenced by investor expectations, technicians claim it only follows that past prices influence future prices. Worden Brothers also provide regular live training seminars across the U. This integration means a tight integration for trading stocks from the chart screen but also one of the best implementations of Stock Options trading visualization available.

If you want social community and integrated news, you will need to roll back to TC v They have also introduced live alerts which you can configure to email or pop up if an indicator or trend line is breached, very useful indeed. However, StockFinder is no longer in active development, which is a shame because I think it is one of the very backtesting suites in the market. Recommended for day traders and those who need excellent real-time news, access to a huge stock systems market and powerful technical analysis with global data coverage all backed up with excellent customer services.

The latest release of Metastock XV has been a big hit with improvements across the board. Excellent watch lists featuring fundamentals and powerful scanning of the markets gets a perfect This is the fastest global news service available on the market including translations into all major languages. Never mind the broadest selection of technical analysis indicators on the market today.

MetaStock is the king of technical analysis warranting a perfect MetaStock harnesses a huge amount of inbuilt systems that will help you as a beginner or intermediate trader understand and profit from technical analysis patterns and well-researched systems. The biggest addition to the MetaStock arsenal is the forecasting functionality which sets is apart from the crowd.

Optuma has been in the market for almost 20 years and they cater to individual investors as well as to fund managers. A fantastic array of technical indicators and drawing tools. Also included are Elliott Wave and Darvas Box, the full set of exotic indicators are present. The interface, the shortcuts, the whole thought process implemented into Optuma does warrant this good score in an important section. They also have an extensive video training library which is very valuable to the new customer.

With a medium price point, it is neither cheap nor expensive, but you do get a lot for your money as you can explore in the detailed EquityFeed review.

Data speeds are excellent and it has excellent U. Also, Equity Feed is the only software to offer Dollar Volume data. The EquityFeed Team have a fantastic set of integrations to your broker to enable this, which includes TD Ameritrade and Interactive Brokers two of the powerhouses of the brokerage world.

But what is the key for days traders? The ability to scan entire markets for liquidity and volume patterns to find volatility you can trade for a profit.

This is the EquityFeed unique offering. The power here is in the technical analysis screening, which is very fast, seamless and powerful. Plenty of off the shelf technical and liquidity scans greet you on opening the program. The great thing is they all operate in real-time so they continue to update. I have been extremely impressed with the progress EquityFeed is making in their product and carving out their Day Trader niche.

Recommended for Quantitative Analysts who develop powerful automated systems and value a huge selection of shared user-generated systems and powerful technical analysis tools. Watch-lists can be tricky to set up. Further development is required here. There is a heavy focus on the sharing aspect of systems with sharing servers which enable people to connect and share systems, perfect for the quantitative analyst. What is great is they also have Artificial Intelligence integrations via the AI Optimizer, which allows for the system to combine different rules to see which rules work best together.

The learning curve will take a time investment on your part. It solves the problem of too much time spent doing analysis, drawing trendlines, tweaking indicators and analyzing timeframes. The automated trendline detection saves a lot of time for traders, speeds up trade preparation in the morning, and improves accuracy. The TrendSpider algorithm uses mathematics to correlate all the bars on a chart and then draw the lines.

It highlights the touches at peaks and troughs in a price trend. Therefore, if a price breaks through a strong area of support and resistance it is more predictive. If you do not like a trend that the AI has used you can manually delete it or fine tune them. With this capability, you can have a complete trendline analysis on any chart in a few seconds. Start a Free TrendSpider Trial. It may seem a little complex at first, but when you get used to it, it makes a lot of sense.

One thing I also really like is the price indicator analysis, you can let the application plot, name and highlight your Japanese Candlestick patterns of choice. Just turn on the pattern recognition it is that easy. Trendspider is an HTML5 application, which means it works on any connected device, requires zero installation, zero data stream or data download configuration. Also, considering the complexity of the automatic calculations the application runs swiftly taking just a few seconds to complete an entire analysis.

Read the Full TrendSpider Review. Notes on the Review: Liberated Stock Trader has affiliate referral agreements with many of the Brokers in the review. This means if you sign up with your broker of choice we may receive a referral payment. These payments help fund this site. This may seem to represent a conflict of interest, however, this review is impartial and only recommends the best solution in any given round based on the data.

Do I have to put in My own details for a good setup, or is there any? So when it only comes to this — screening — what would you say is the best software? Hi Andy, with the top packages you can screen on Fundamentals, e. You can also screen on technical analysis, price above 20 day moving average or stocks at 52 week low. It really depends on how you want to trade, on fundamentals or technicals or both.

Stocks moving higher from a lower base, with good fundamentals. Both technical and fundamental work, and Metastock, TC perform the job really well. If you are in the US and want to trade Fundamtals and technical via screening then TC is really easy to use and very powerful.

Metastock has powerful Advisor wizards for things like Elliot waves etc. You should have listed the also rans and their rating just so we know what were covered and what were left out. Also, perhaps you can do the same for scanners both stand alone as well as part of packages like above. Barry, I just took a look at tradingview and I have been around some years investing, it loooks great, nice find.

Have you ever evaluated Stockopedia, based in the UK? If not please consider taking a look at themin the future. Hi Ron, I never heard of it. I just had a quick look, seems to have some good functionality, but quite expensive. I will check deeper next round. I have been using the paid version of stockcharts.

Hi Darren, well I did do a review of its free features over on this page. For me it misses some backtesting features and customers indicators and charts. But I might be wrong. What are your views as to how it stacks up? Perhaps I will review it for the next round. I use to use Stockstotrade, and one day I go to log on and it said my account was suspended, I called and wrote customer services and they said it was do to Market Compliance inconsistencies.

Hey Tim its not my fault you platform is a piece of sh1t! Hi Joseph, there certainly are a lot of RIP off stories in the markets. I heard of this guy, he certainly has some intense sales pitch.

I think it is best you choose your own stocks and go with a professional discount brokerage to execute your trades. By the way, the stockstogo website has been hacked with malware. If says chrome is out of date, and kicks off an auto download of an. The tools reviewed here seem much cheaper but it is hard to compare. I guess these companies are throwing in training also. If you want to trade forex, then a CFD broker would work out a lot cheaper. Many of them have education, free software and analysts providing ideas and signals.

MetaStock on this list also have expert advisors and idea strategies predeveloped systems. TradingView also have traders you can follow. MetaStock has been providing award-winning charting and analysis tools for the self-directed trader for over 30 years. Capitalizing on technical analysis, our line of trading software and market data are designed for active traders of all levels so they can backtest, scan and analyze the markets with confidence.

The result is buy and sell signals you can count on. It provides clean, accurate market data you can count on. Is the Market taking you for a ride? Not sure what to do next? Take some advice from 9 professionals who have experienced just about every market condition and then some. Some of the industries' most notable experts have contributed to this book. Now you can learn what they already know

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