What is the study of technical analysis?

Maybe Wyckoff was clairvoyant.

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Dead Horses?
May 18, 2001
By John Bollinger, CFA, CMT
Capital Growth Topics
"Are you riding a dead horse? Get off and get a live one." wrote Richard D. Wyckoff in 1932 for the magazine "Stock Market Technique".

For those of you not familiar with Mr. Wyckoff, he was a stock market technician who operated in the early part of the century trading, writing and teaching. He founded the Wyckoff Stock Market Institute*, which is still going strong today in Phoenix Arizona under the able tutelage of Craig Schroeder.

Mr. Wyckoff believed that the ebb and flow of supply and demand was portrayed on a price and volume chart for all to see. He was particularly interested in springs and up-thrusts, those false moves that occur just prior to the real events, which serve to shake out many investors at precisely the most inopportune moments. Indeed, Wyckoff knew more about the markets and technical analysis in the 1930s than all but the most learned technicians today.
Among his books are:

Fourteen Methods of Operating in the Stocks Market, 1909/24 (from whence the above quote comes)

Studies in Tape Reading, by Rollo Tape, 1910 (a pen name)

How I Trade & Invest in Stocks & Bonds, 1924

Wall Street Ventures & Adventures Through 40 Years, 1930

Stock Market Technique Number One, 1933

Stock Market Technique Number Two, 1934

And, of course, the massive course offered by SMI.

Fraser Books, www.fraserbooks.com has reprinted many of Wyckoff's works and "Ventures and Adventures" is available from Trader's Press, www.traderspress.com.

If you don't know Mr. Wyckoff, it might be time to meet him.

John Bollinger, CFA, CMT

18 May 2001

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In the October 2002 S&C, five historic figures were named as "titans of technical analysis": Charles Henry Dow, R.N. (Ralph Nelson) Elliott, W.D. (William Delbert) Gann, Arthur A. Merrill, and Richard Wyckoff.

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wintermute said:

I won't add anything on what's already been said, but I will ask an additional question.

Is T/A ever self fulfilling?

That is, if a chart in general looks like a buy in enough T/A's minds, will that be enough to force the price up?? A few will get on board early, making the next lot a little more confident, that pushes it up a bit more, as more and more T/A's jump on more and more decide their analysis was correct and join the crowd.... Similarly if a chart is saying sell, will that perpetuate a down trend that may be going against all fundamentals, or for that matter cause a reversal because the stock looks overbought (even though there may be a damn good reason for the price to be going up)??

I guess to be succinct, how much of the crowd is using T/A??!!

Tony.

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Technical analysts seek to identify price patterns and trends in financial markets and attempt to exploit those patterns. While technicians use various methods and tools, the study of price charts is primary.

Technicians especially search for archetypal patterns, such as the well-known head and shoulders or double top reversal patterns, study indicators such as moving averages, and look for forms such as lines of support, resistance, channels, and more obscure formations such as flags, pennants or balance days.

Technical analysts also extensively use indicators, which are typically mathematical transformations of price or volume. These indicators are used to help determine whether an asset is trending, and if it is, its price direction. Technicians also look for relationships between price, volume and, in the case of futures, open interest. Examples include the relative strength index, and MACD.

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Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, cycles or, classically, through recognition of chart patterns.

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Wysiwyg said:

I don't know of any education course that covers the general field of T/A. This is disappointing.

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Technical Analysis (FIN231) in 2010

This subject introduces the key concepts and tools required to perform technical analysis. With a wealth of examples and hands on learning features, the subject facilitates the development of skills in the construction, interpretation and application of charts to a variety of markets.
Learning outcomes
At the completion of this subject students should be able to:

• Define and apply key concepts in technical analysis and understand how it complements other forms of analysis
• Apply basic common techniques in technical analysis
• Interpret and discuss price, volume and open interest charts
• Identify trends and turning points using various basic techniques
• Formulate and justify trading strategies based on technical analysis

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Pre-requisites
Students enrolling in a Masters level elective subject are assumed to have the pre-requisite knowledge in the four core subjects (FIN111, FIN112, FIN113 and FIN114). This requirement can be waived where students are studying one or more core subjects concurrently with an elective, or they are studying single subjects and are not enrolled for the Masters, Graduate Diploma or Graduate Certificate courses.

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