Thread: Technical Studies or the study of psychological contracts

Criticized or praised, technical analysis does not leave indifferent. This type of analysis is based on the assumption that the past can predict the future. Indeed, elements of the past to detect the psychology of the stock market and thus estimate its reactions in the future.

An efficient market at 100% is a market where all available information is distributed to all players at the same time. In other words, all the players learn at the same time that a company is to revise downwards its forecast that a president will resign or that a company will obtain a contract for several million. In fact, the course at a time t takes into account all the information and the study of past courses have absolutely no interest.

However, stock markets, where they are located, are far from being fully efficient. Thus the information is filtered, decoded, decrypted and distributed unevenly. Each player then acts according to the information it holds. If the investor does not have any information or if the analysis wrong, he can see his portfolio melt.

Technical analysis is an analysis based on the recognition of this inefficiency. The information is not known to all at once. Prices change according to the information piecemeal. It is therefore logical to study the way to investigate the behavior of investors. Indeed, if a group of investors, more or less influential, becomes aware of relevant information, they quickly take a position on the market, and will change the price and volume of a title, even though no information you are not received. At any time, the investor can determine the level of price and volume traded on a stock. Those are the only things that anyone can know. Thus an increase in volume to a value may suggest that the title is followed by more investors than in the past.

Technical analysis is a technique based on the psychology of the market as a whole. This is not to calculate some ratios but to interpret charts and technical indicators. The results of technical analysis are directly correlated to the capacity of interpretation of the analyst. This ability develops over time, and as anyone can understand that a steady increase in sales is a good thing for the group, both a technical indicator can be interpreted differently from one individual to other.

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