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technical_analysis.md

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  • Technical analysis
    • funtion ( price_history, volume, open interest) => pattern
  • Rational analysis or fusion analysis = TA + FA
  • Investor and newsletter polls, and magazine cover sentiment indicators, are also used by technical analysts
    • How to find sentiment analysis of large fund managers?
  • Empirical evidence
    • Nonlinear prediction using neural networks occasionally produces statistically significant prediction results.
    • A Federal Reserve working paper[19] regarding support and resistance levels in short-term foreign exchange rates "offers strong evidence that the levels help to predict intraday trend interruptions
  • Technical trading strategies were found to be effective in the Chinese marketplace
    • Contrarian version of the moving-average crossover rule
    • The channel breakout rule
    • Bollinger band trading rule
  • Head-and-shoulders or double-bottoms were considered very useful
  • Techniques such as Drummond Geometry attempt to overcome the past data bias by projecting support and resistance levels from differing time frames into the near-term future and combining that with reversion to the mean techniques
  • Thomas DeMark's indicators enjoy a remarkable endorsement in the financial industry.
    • DeMark indicators - Sequential
    • DeMark indicators - Combo
    • DeMark indicators - Setup Trend
    • The Sequential indicator alone showed statistically significant price moves on a wide range of commodities
  • Recent research suggests that combining various trading signals into a Combined Signal Approach may be able to increase profitability and reduce dependence on any single rule.

MACD

  • Technical Analysis Indicator MACD
  • Centered oscillator - Oscillator above zero line is bullish, below zero line is bearish mode
  • If you compare MA with MACD, MACD would have given signals much sooner

EFH

  • The efficient-market hypothesis (EMH) states price inclusive of all the information
  • As per EMH contradicts the basic tenets of technical analysis by stating that past prices cannot be used to profitably predict future prices.

Rational thoughts (with biasness for pattern from 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.

  • Recognition of these patterns can allow the technician to select trades that have a higher probability of success

  • 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

Reference