Is technical analysis getting the recognition it deserves in university studies?

Quote from optioncoach:

I have added Technical Analysis to the classes I teach. It deserves a place in financial education just like fundamental analysis.

Technical and Fundamental analysis are the same thing, looking at past data and trends to make a forecast or determination of future price action. Just because one is looking at earnings per share versus historical prices does not make one better than the other.

Also, most people, including many here use technical analysis INCORRECTLY. Many expect it to be a black box system which tells you specifically when and where to go long or short and when to get out. These are the lazy traders usually looking for the quick fix and have no desire to work at it.

That is why TA studies are flawed and an embarassment for the academic community. They take one indicator and test it over 30 years and go long or short if X happens and then show that over 30 years it performs no better than the index. I disagree. Anyone who trades an indicator this way should LOSE money since it is a stupid way to trade. No one should simply go long or short using one indicator without any further analysis or study or even input. This is the biggest flaw in "Random Walk Down Wall Street".

technical analysis is a means to analyze the price action that is occuring on the chart, to measure the movement strength or trend, to try and formulate patterns and weed out some of the price action noise. It is a tool the trader needs to use to analyze what is happening and thus make their own decision as to what is more likely than not going to happen and invest or trade off of that analysis. The TRADER has to make the prediction or directional bet, not rely on TA to spit it out like a black box.

Fundamental analysis is no different, you don't simply look at EPS growth and decide to go long or short on objective random criteria. You use EPS growth as one tool in analyzing the stock to make an investment decision.

People want proof that TA works but it is like asking whether a hammer works. If you know how to use it correctly and dont expect it to do the work for you, then it is a useful tool. Asking whether it works is asking the wrong question. Asking whether it helps you better analyze the price action and history to make trading decisions is what TA is for.

Therefore, sinec it is widely used in the investment world and widely used incorrectly, I make it a point to teach it as ONE tool in the arsenal of investing and spend even more time to ensure that people understand it is not a crystal ball or predictor but merely an analytical tool and the individual is still the ultimate decision maker in whether to go short or long.

It is not a question of whether it works because it works perfectly. TA does exactly what it is supposed to do. Moving averages show a moving average of the price. Bollinger bands show changes in volatility. Oscillators oscillate. Support/resistance lines show areas where buyers or sellers outnumber the other and win. In that sense TA works perfectly in producing a number or graphing a value. What is required is for the investor to make some sense out of this analystical data and trade off of it. That cannot be taught specifically, only guidance recommended. The student must learn how to use the tool for themselves just like the painter can be taught what a brush is and how to apply the painit and mix it but must ultimately learn for themselves how to apply the tools correctly.

Fundamental analysis is the same thing. we can all learn financial statement analysis but what good is the data if the person has no idea how to analyze and interpret it to make a decision for themselves.
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Excellent post. It simply amazes me how many here on ET fail to grasp what you wrote. Well put.

st
 
Quote from NihabaAshi:

Good question...I sent pm because it contains private info.



I'm not trying to be sarcastic but if you don't know...

Why are you at this discussion forum?

Mark
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what are the applications, mark?? annaland is correct, this question is the critical one.

surf
 
Quote from optioncoach:


There are those who think futures are a zero sum game . . .
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Huh? If you don't know this you need some remedial trading education.

(Actually after commissions futures are negative sum.)
 
Quote from Bernoulli:

Huh? If you don't know this you need some remedial trading education.

(Actually after commissions futures are negative sum.)
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I love it - lets combine two of the most contentious issues into one mega thread: Does TA really work and are futures zero-sum.

This thread should last for months!
 
Quote from GTS:

I love it - lets combine two of the most contentious issues into one mega thread: Does TA really work and are futures zero-sum.

This thread should last for months!
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:D

Topic has already changed from Is technical analysis getting the recognition it deserves in university studies?

Soon we'll be talking about Puretick and Jack.

:p

Mark
 
Quote from NihabaAshi:

I'm not trying to be sarcastic but if you don't know...

Why are you at this discussion forum?

Mark
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Thanks for a thought provoking and empowering reply.

ps. I <b> am</b> being sarcastic :)
 
The reason that TA as described here is not taught is that there is really no body of knowledge -- just conjecture, hope, what have you.

It doesn't mean that there won't be, however. Over the past fifteen plus years there has been a lot of statistical work done with high-frequency price data, looking at issues such as price formation, market microstructure and volatility. There have been conferences at places like Princeton and Chicago that have looked at some of the results. The statistical tools are not easy to master, but there are statistics courses where they are taught and where they work with financial data.
 
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