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Introduction
Technical Analysis is Increasingly Popular
Technical analysis is one of the most basic and well-accepted approaches
to investing. Developed in the early 1900s by Charles Dow (of Dow
Jones Industrial Average fame), technical analysis is the study
of market action. Using charts as the primary tool, a technical
analyst forecasts future price trends of securities.
Security prices move in trends. This principle underlies technical
analysis. Trends, however, do not last forever. As prices change
direction, they tend to form recognisable patterns on the chart.
These chart patterns often herald a predictable outcome in a security’s
price, enabling investors to identify new trading opportunities,
or to confirm opportunities identified through other means, such
as fundamental analysis.
"To knowledgeable investors,
chart patterns are not squiggles on
a price chart; they are
the footprints of smart money. . . It pays to look for the
footprints."
Thomas N. Bulkowski, Encyclopaedia
of Chart Patterns
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By analysing a security’s historical prices, technical analysis
allows investors to position themselves in the market. For the technical
analyst, the past is the key to understanding the future. The essential
tools for the analyst are the chart and the patterns formed on it.
But Chart Pattern Information is Limited
Despite its growing popularity, the potential contribution of technical
analysis has been severely limited by a fundamental lack of information.
To date, chart pattern identification and analysis has been a laborious,
manual activity. In the early days, investors painstakingly plotted
data on graph paper. Today, even the most experienced investment
professionals, equipped with the best available software tools can
only track 50 to 75 securities per day. This is a ridiculously small
number when you consider the size of today’s global markets.
Trading Opportunities Are Missed
Without access to timely, accurate, comprehensive chart pattern
information, technical analysts will continue to miss out on countless
trading opportunities. As a result, the portfolio returns of professional
money managers and individual investors that depend on technical
analysis will have suffered.
Fast, Simple, Timely Access to Chart Patterns
is Needed
Investors need fast, simple and timely access to chart pattern
information from hundreds of thousands of financial instruments,
from around the world, in order to make better trading and investment
decisions.
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