Technical Analysis And The Efficient Market

Technical analysis attempts to predict price changes based upon patterns in market data. Some of the most popular technical analysis patterns are given below:

Trendlines attempt to predict where a stock will go based upon where it has been, with the idea that a "trend is your friend" and will continue.

Support and resistance suggests where buyers and sellers lurk respectively. The idea is that previous areas of high trading activity will create support and resistance levels with traders looking to buy in or sell.

Breakouts occur when the price penetrates an existing support or resistance level an is followed by a rapid price movement in the same direction

Moving averages are an average of price data. The two most popular averages are probably the 50-day and 200-day moving average. Prices crossing the moving averages or moving averages crossing each other can indicate a change in trend.

The efficient market hypothesis says that the success of technical analysis would be completely random because if it wasn't enough people would continually use the same strategy that it would destroy any chance of it being successful.

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.