Forecasting the exchange market is not only on the basis of any or more of the fundamental factors, but with the help of various technical analysis tools.
Technical analysis is the analysis of market movements for the previous periods of time. Recently, more and more traders are of primary importance methods of technical analysis.
- graph bars;
- schedule "noughts and crosses";
- Japanese candlesticks;
- average rate movement (Moving Average - MA).
the Dispute on the usefulness of the technical analysis of the markets also excites the minds and is as inexhaustible as the dispute over the primacy of matter. You can understand sick and uncertain to a community, when in search of the support it gets from the dark corners of memory beliefs, which insolvency, it would seem, had long been in need of argumentation. Much more painful when the economic journalism and practice, the banner of which must be a reason, begin to pay attention approaches, at least in the academic environment are thought to be a logical questionable. Of course, one could argue that the public needs to know everything, including about alternative methods. But when in the professional literature does not stop the stream publications, with sincere piety sensitive about technical analysis;
Investment consultants presented their investors as almost the only reasonable method of market research;
the Developers of the investment software is proud to report on the implementation of a new version of an even greater number of years of proven techniques;
Almost never says that justified the use of technical analysis requires a considerable number of reservations, the iron patience comes to an end.
one of the most widely used definitions, technical analysis (TA) is a set of methods to determine the right moment for the purchase or sale of any assets (mostly securities or currencies) is based on the analysis of price trends and trading volumes. The main goal is to identify the signals that would help predict replaced the "moods" of the market.
As a rule, methods THAT are based on the previously observed "laws" dynamics of market parameters, and also on the psychological characteristics of the trade participants. Followers THAT believe that the changes on the market, only 10 % of logic, and 90 % are explained by psychological factors. Therefore, predicting, as in the mass market participants will act or "crowd"who mastered THE "poet" can be achieved brilliant investment results.
THAT is inextricably linked to the construction and study the various charts and diagrams, so its agents often called чартистами (from the English chart - chart; not to be confused British proletarian, followers of the revolutionary movement of the mid-XIX century). Using numerous typical picture showing in the opinion of the chartist, concerning the coming of the particular market situation, they try to play on a short-term price dynamics, ignoring, as a rule, long-term benchmarks, If we consider THE methodology in its pure form, its followers still the industry or firm is the target of the action is the main thing that it delivers those signals.
a New and strong impetus to the development of THE received during the era of total computerization. Graphing and complex calculations of indicators, indexes and oscillators, which previously had to be performed literally on the display. No wonder Arsenal (and aplomb) chartist has grown significantly during the last years, a new generation of technology added them a lot of charm and a kind of mysticism.
As it is strange, but even the most sophisticated methods of technical analysis usually do not justified, except трюизмов like "history repeats itself:". Opening a phenomenon chartists are met his foreign party does not trying to find an explanation. Moreover, some representatives of this theory there is an opinion that the mechanism of action of the theory of the opinion that the mechanism of action of the market is incomprehensible, in other words, we will never know the "why", we can only hope to understand the "how".
nevertheless, you cannot completely deny the technical analysis in the presence of certain foundations (mainly it concerns the stable trends). Firstly, it is a natural idea to play on prejudices and gregarious instincts "crowd". If, for example, it is known that non-professional investors in this situation, do so-and-so, there is a principal possibility to predict the direction of the market, for Example, any shares may stimulate its acquisition, which leads to further strengthen the trend. Economists call such an effect of self-fulfilling prophecy , i.e. self-fulfilling expectations. Secondly, the information is distributed unevenly and is first in some market players (insiders), and then the other. Often, it is the process of diffusion of the new information causes a further develop the emerging trends. Finally, if we talk about the change of direction of the market, chartists argue that people tend to remember the price they have paid (or would be willing to pay) per share. Using this proposition (and only!) justified become generally accepted notion of "level of resistance" (support) and numerous classical forms of technical charts: achievement of the previous price of maximum (minimum) forces the investor to sell (buy), which should lead to crisis trends. However, against these (rather naive, by the way) explanations can be put forward many convincing arguments. First, the purely psychological factor as the professionalisation of markets means less and less. Secondly, the trend may vary and often actually is changing much faster than the analyst is able to read any signal. Thirdly, even if we assume that technical analysis methods are effective, then the more people use it simultaneously, they have fewer chances to benefit from. Fourthly, as the distribution of such methods is that traders have an incentive not to wait for the direct appearance of the technical signal, but try to act ahead. It may not distort the relevant principle of technical analysis, violating the clean signal (of course, again, if we believe in his existence). Finally, if someone is confident that tomorrow the price should grow by 20%, then in a liquid market, where prices reflect information almost instantly, it will inevitably happen today. Recognizing the weakness of its position, moderate chartists go back on their word and call complement the technical qualities elements of fundamental analysis (i.e. research on the "intrinsic" value of the asset). However, it is not clear how much of the increase in value of this symbiosis due to the fact THAT.
it Is time to move to implicitly постулируемому basic principle чартизма, before whom all the above simply pales: the market has a memory, or, if you like, inertia, that is, knowledge of price dynamics in the past can help predict the future. In particular, it is considered that if the price rose yesterday, but today it is more likely to rise than fall (is the ideology of the so-called signal strength of the market). Economic theory position is exactly the opposite: rates are subject to the so-called random walk (random walk). With some simplifications, you can simulate the price process in the following way: in each moment of time is thrown coin and depending on the outcome of the dice price may move up or down with equal probability. Thus, every next step is unpredictable in terms of what happened earlier.
Initially as a popular illustration of random walks cited route drunkards in the open field. This route is irrational and unpredictable.
by the Way, if through experiments construct random price of the series they can make any favorite чартистами form. Of course, from this point of view of technical analysis is perfectly absurd. Note that unlike other ambiguities this dispute is very easy to solve with the help of a simple statistical test, by calculating the autocorrelation prices with different time lags. If these autocorrelation for some time periods will be significantly different from zero only in sackcloth and ashes, and to recognize the absolute correctness of the chartist. But alas for them, for the vast majority of the markets, this is not so. (In fairness, we note that the hypothesis of random walks are also often finds no direct evidence, but not rejected. The question of a more complex non-linear dependencies is still open).
by the Way, if computers are armed to the teeth chartist, they become an invaluable tool for exposing THAT. A posteriori calculations have helped expose tens of so-called methods, which, showing remarkable results in some periods of time, completely denied on the other.
Besides the logical and empirical arguments against THAT, there is a "good"life. Many can convince the following fact: although in principle at the expense of successful operations on the financial markets practice and professional beliefs, among them very difficult to meet a chartist. It would seem, people familiar with the recipes of winning, must use them and don't share their invaluable knowledge with others: in short, if you're so smart, then why are so poor?
the Sleep of reason produces expenses
Here the astute reader would probably say: "If it really is so hopelessly for THAT, then what caused by his unfading popularity?"
firstly, nobody claims that technical analysis is absolutely sterile and never brings profit. No, this actually happens quite often, but, unfortunately, not more often, than using a simple investment strategies (especially if to take into account the taxes and fees). This conclusion also repeatedly confirmed empirically.
secondly there are reasons psychological properties.
1. THE simple, highly diverse (if not to say разношерстен) and maximum алгоритмизирован. This provides ease of use, durability approach in General, if a failure of individual components and removes Analytics responsibility for possible errors.
2. TA - TA straw, which grabs the investor, desperate to understand the functioning of financial markets. This is particularly the case when the unavailability of adequate basic information and/or inability to treat her.
This is sufficient to effect technical analysis in separate sectors of the market constantly grew. So, according to the polls Euromoney, in 1979, 90% probable agencies in studies of exchange rates were based on fundamental analysis, and in ten years, more than a third of respondents used exclusively THAT! According to the Bank of England, 90% of the leading dealers of the currency market in London extent or another, use THAT.
General currency market is considered to be among economists least " rational." One of the reasons is that the biggest operators of this market are : Central banks, which conduct active foreign exchange intervention, often caused by non-economic (i.e. irrational from the point of view of fundamental analysis), considerations. There are other factors hindering the implementation of price "effectiveness" of the currency market, resulting exchange rates sometimes deviate significantly from the dictated by the fundamental values.
In these conditions the use of technical methods for the prediction of changes in exchange rates is desirable. The more investors believe in the technical signals, acting according to them, the better work already marked us the effect of self-fulfilling expectations. And although in the long run exchange rates and quotes undoubtedly tend to fundamental values, even the most rational investor cannot ignore the presence on the market chartist.
essentially, there were two basic ways to profit: together with a bunch of" exploiting short-term trends, using the methods of the technical analysis, or play against the market, hoping to reverse a rollback in prices. The majority chooses the first option. But why rational investors, focusing on a long-term fundamental criteria, do not try to large beat irrational existing chartist, just as once George Soros has punished the Bank of England? Unfortunately, this requires considerable funds, the possibility of linking the relatively long periods and, finally, any big game is fraught with serious risks. Meanwhile, the majority of leading institutional investors and to the recent scandals ( Barings, Daiwa) prohibit their traders to maintain an open currency position for more than a day, and lately is just a vigilant control over their actions. Limited funds, risk-aversion and internally short-term orientation of fundamental investors - that's where there are reasons for the invincibility of the chartist.
one of the Most hard-core cynics believe that survived mainly due to the fact that it encourages investors to work actively on the market. As additional operation is unnecessary brokerage commissions. Scold same technical analysis easy, though, because all with сладострастием pounce on naive charts, invented by the old man Dow hundred years ago. This is not surprising: they (and their ilk) with manic persistence reproduce all textbooks and brochures. But it's still that criticizing medicine for its medieval methods were powerless before the plague and cholera.
to Understand the current state of technical analysis not all get. First, the basic economic (perhaps, and technical) education little. Have to be a mathematician, preferably above the average (good deal in synergetics, the theory of pattern recognition, neural networks etc). Secondly, successfully acting analyst never will tell about their methods: he earns money, but because they are unknown to the public. Widely published mostly losers (again compromising technical analysis). Autocorrelation in the price ranks, as a rule. But if we use the analogy with a drunkard, he, despite all their vacillation, at least in 90 cases out of 100 by the morning of the reach of the home (that's such a prediction accuracy on the market!). White noise (the embodiment of a random signal) and chaos is not identical concepts. In the second case no autocorrelation, and the process is quite predictable. However, when a random walk all is not lost, there are means in this case. Chances of success are greatly enhanced, if not to take up the task to predict quotes (for some reason everyone is waiting for the analyst to have exactly this), and limit ourselves to the elaboration of a line of conduct (buy-sell).
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