Forex Education Center- History Of Technical Analysis,The oldest example of technical analysis is that developed by Homma Munehisa in the early 18th century using the technique of candlestick charts (candlestick chart) which is the main analytical tool at this time
Dow Theory is based on a collection of writings written by Charles Dow who is the founder and editor of Dow Jones, which became the source of inspiration of the development of modern forms of technical analysis in the early 19th century There are also Ralph Nelson Elliott and William Delbert Gann also develop their technique in the early 20th century still many technical analysis tools and theories that have been developed in recent decades due to the growing use of computers as a tool.
Benyak criticism of technical analysis made by the well known fundamental analysts such as Peter Lynch, commented that "The graphic is very good for predicting the past". Warren Buffett says that "I realized that technical analysis is not useful when I invert the graph so that the top is under and I did not find anything different answers and if past history are reflected there then that would be the richest man is the librarian"
Most academic studies of technical analysis states that only have a small predictive power, but some studies suggest that technical analysis can be profitable. Cheol-Ho Park and Scott H. Irwin studied 95 modern studies on profitability and stated that 56 of whom were found positive, 20 negative test result and 19 indicated yield mixed results. "
An influential study conducted by Brock et al. in 1992 which showed support for technical trading techniques in a way that has been tested for the surveillance data and other problems in 1999
After that, a comparison study conducted by an economist named Gerwin Griffioen Amsterdam concluded that: for the American market, Japan and some Western European markets indicates that the forecast does not show favorable results after implementing little transaction costs. "
Hypothesis of appropriate markets or in foreign terms is known as the efficient market hypothesis (EMH) is a contradiction to the teachings of "technical analysis" is the principle that past prices can not be used to predict future prices. or in other words it is said that technical analysis is not effective. Eugene Fama an economist, published an essay that was published in the Journal of Finance in 1970, said that "In a short period, supporting evidence of appropriate market model will expand and become something unique in the world economy and contrary evidence against the wane. "Proponents of the EMH states that" if a price can quickly describe all relevant information, then there is no method (including technical analysis) can be "against the market". "
Experts say that EMH ignores the way markets work in which many investors rely on profit hopes or past performance. For the future price of a stock can be influenced strongly by the hope / expectation of investors, experts expressed hope that following the above prices in the past can affect the future price.
Hypothesis irregular steps or in a foreign term better known as Random walk hypothesis [23] which is another form of the hypothesis of appropriate market, which is based on the assumption that market participants fully utilize all the information on price movements in the past (but do not need to use general information other).
Technical experts state that EMH theory and the theory of irregular steps, they will override the realities that occur in the market in which market participants act rationally where they could just be greedy, excessive fear of risk, and others. and price movements that occur when the current is dependent on previous price movements
