Technical analysis – ideal for computing, but missing real market processes
The main idea that lies in the foundation of technical analysis, or TA for short, is that price includes everything in itself. From this standpoint, if we see a price movement up or down, large or small, we don’t really want to know the reason behind this movement; instead, we just acknowledge that it was caused by some fundamental factors and try to focus on the future price development in regard to the observed price movement only.
Of course, TA can analyze a series of data and not just a single data point. In this regard, TA studies help in identifying patterns or repeating sequences in price time series that bear resemblance to each other. TA suggests that if we observe a pattern that we already saw in the past, then the following price development will also be similar to what happened in the past; therefore, we can be prepared and exploit it.
With TA, we don’t want and don’...