The Emperical Evidence

Whether technical analysis actually works is a matter of controversy. Methods vary greatly, and different technical analysts can sometimes make contradictory predictions from the same data. Many investors claim that they experience positive returns, but academic appraisals often find that it has little predictive power.

Modern studies may be more positive: of 95 modern studies, 56 concluded that technical analysis had positive results, although data-snooping bias and other problems make the analysis difficult.

Nonlinear prediction using neural networks occasionally produces statistically significant prediction results.

A Federal Reserve working paper regarding support and resistance levels in short-term foreign exchange rates

"offers strong evidence that the levels help to predict intraday trend interruptions,"

although the

"predictive power"

of those levels was

"found to vary across the exchange rates and firms examined".

What Is Random Walk Hypothesis?

Random walk hypothesis

The random walk hypothesis may be derived from the weak-form efficient markets hypothesis, which is based on the assumption that market participants take full account of any information contained in past price movements (but not necessarily other public information). In his book A Random Walk Down Wall Street, Princeton economist Burton Malkiel said that technical forecasting tools such as pattern analysis must ultimately be self-defeating.

"The problem is that once such a regularity is known to market participants, people will act in such a way that prevents it from happening in the future."

In a 1999 response to Malkiel, Andrew Lo and Craig McKinlay collected empirical papers that questioned the hypothesis' applicability that suggested a non-random and possibly predictive component to stock price movement, though they were careful to point out that rejecting random walk does not necessarily invalidate EMH.

Technicians say the EMH and random walk theories both ignore the realities of markets, in that participants are not completely rational and that current price moves are not independent of previous moves.

Critics reply that one can find virtually any chart pattern after the fact, but that this does not prove that such patterns are predictable. Technicians maintain that both theories would also invalidate numerous other trading strategies such as index arbitrage, statistical arbitrage and many other trading systems.

Market Hypothesis

"Efficient market hypothesis"

"Economist Eugene Fama published the seminal paper on the EMH in the Journal of Finance in 1970, and said "In short, the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse.""

The efficient market hypothesis (EMH) contradicts the basic tenets of technical analysis by stating that past prices cannot be used to profitably predict future prices. Thus it holds that technical analysis cannot be effective.

EMH advocates say that if prices quickly reflect all relevant information, no method (including technical analysis) can "beat the market." Developments which influence prices occur randomly and are unknowable in advance. The vast majority of academic papers find that technical trading rules, after consideration for trading costs, are not profitable

Technicians say that EMH ignores the way markets work, in that many investors base their expectations on past earnings or track record, for example. Because future stock prices can be strongly influenced by investor expectations, technicians claim it only follows that past prices influence future prices.

They also point to research in the field of behavioral finance, specifically that people are not the rational participants EMH makes them out to be. Technicians have long said that irrational human behavior influences stock prices, and that this behavior leads to predictable outcomes.

By considering the impact of emotions, cognitive errors, irrational preferences, and the dynamics of group behavior, behavioral finance offers succinct explanations of excess market volatility as well as the excess returns earned by stale information strategies.... cognitive errors may also explain the existence of market inefficiencies that spawn the systematic price movements that allow objective TA [technical analysis] methods to work.

"Author David Aronson says that the theory of behavioral finance blends with the practice of technical analysis."

EMH advocates reply that while individual market participants do not always act rationally (or have complete information), their aggregate decisions balance each other, resulting in a rational outcome (optimists who buy stock and bid the price higher are countered by pessimists who sell their stock, which keeps the price in equilibrium). Likewise, complete information is reflected in the price because all market participants bring their own individual, but incomplete, knowledge together in the market.

FORECASTING? Is it profitable?

An influential 1992 study by Brock et al. which appeared to find support for technical trading rules was tested for data snooping and other problems in 1999 - the sample covered by Brock et al. was robust to data snooping.

Subsequently, a comprehensive study of the question by Amsterdam economist Gerwin Griffioen concludes that:

"for the U.S., Japanese and most Western European stock market indices the recursive out-of-sample forecasting procedure does not show to be profitable, after implementing little transaction costs. Moreover, for sufficiently high transaction costs it is found, by estimating CAPMs, that technical trading shows no statistically significant risk-corrected out-of-sample forecasting power for almost all of the stock market indices."

Transaction costs are particularly applicable to "momentum strategies"; a comprehensive 1996 review of the data and studies concluded that even small transaction costs would lead to an inability to capture any excess from such strategies.

Technical Trading Strategies

Technical trading strategies were found to be effective in the Chinese marketplace by a recent study that states, "Finally, we find significant positive returns on buy trades generated by the contrarian version of the moving average crossover rule, the channel breakout rule, and the Bollinger band trading rule, after accounting for transaction costs of 0.50 percent." Nauzer J. Balsara, Gary Chen and Lin Zheng The Chinese Stock Market: An Examination of the Random Walk Model and Technical Trading Rules

Simplifying Your financial Life

It seems that every year the business of keeping one's finances in order grows more complex . but you can simplify your personal financial life if you rely on a well-tested managerial technique - delegate. You can do it by using various services and plans.

save and invest painlessly by subscribing to payroll-deduction plans and salary-withholding plans at your job. in both cases, a portion of your earnings is automatically invested for you each payday. your money tends to grow fast because you get some tax breaks and your employer often marches part of what you put in.

Take advantage of the automatic dividend-reinvestment plans offered to stockholders of more than 1,300 companies, many of them utilities. Instead of collecting a dividend check from the company each quarter, you get stock equal to the value of the dividend. you usually pay no commission or fee, and the whole transaction is handled for you automatically by the company.

Price-based Indicators

These indicators are generally shown below or above the main price chart.

* Advance decline line - a popular indicator of market breadth
* Average Directional Index - a widely used indicator of trend strength
* Commodity Channel Index - identifies cyclical trends
* MACD - moving average convergence/divergence
* Relative Strength Index (RSI) - oscillator showing price strength
* Stochastic oscillator - close position within recent trading range
* Trix - an oscillator showing the slope of a triple-smoothed exponential moving average
* Momentum - the rate of price change

Types of Charts

* OHLC "Bar Charts" - Open-High-Low-Close charts, also known as bar charts, plot the span between the high and low prices of a trading period as a vertical line segment at the trading time, and the open and close prices with horizontal tick marks on the range line, usually a tick to the left for the open price and a tick to the right for the closing price.


* Candlestick chart - Of Japanese origin and similar to OHLC, candlesticks widen and fill the interval between the open and close prices to emphasize the open/close relationship. In the West, often black or red candle bodies represent a close lower than the open, while white, green or blue candles represent a close higher than the open price.


* Line chart - Connects the closing price values with line segments.


* Point and figure chart - a chart type employing numerical filters with only passing references to time, and which ignores time entirely in its construction.

Part-Time Jobs

How to handle a part-time jobs.

by: Ryan Reyes
April. 16, 2010 2 9:25 am

A new class of high earners is working less and enjoying it more.
The number of part-timers is fast expanding, and so is the list of employers welcoming them - and willing to pay them well.

To be a professional and a part-time worker was once a contradiction in terms. But no more. Today more than a million professional choose to work part-time. some do so voluntarily, others are motivated by economic forces; but whatever the reason, one out of every eight professionals has decided to forgo full-time employment.

Incentive variations in part-time work are becoming more common. some people put in a full 40 hours or more a week but for , say, only six months or less a year. For some married couples or for two women who want to partially re-enter the work lace, job sharing makes a comportable fit. what they do is divide one position's hours and responsibilities.

The part-time work that is easiest to get is in hard-to-find specialized skills. This include medicine , law, accounting, engineering, and especially, data processing. Professionals who have experience in this areas can find many jobs.

Of course, the fewer hours you put on the job, the less money you take out. At least half of all part-timers get some fringe benefits. you also should be able to show how you would keep up with responsibilities that normally require full-time hours, such as travel and staff meetings. Always stress the quality of your work above the money the company would save on your salary.

Tracking down a part-time job at another company will take considerably more time and effort. If you get an interview, be prepared to explain how you would handle specific problems that a job might present for someone working part-time and much better if you volunteer to go full-time when emergencies arise. And offer to work a scaled-down schedule on a trial basis for a few months.

The Biggest Social Change

A Simple Hints.

The continuing rise of women. Women at work for pay represent a tremendous new bloc of consumers and decision-makers. They a reach source of talent, and they will sharpen our productivity, our competitiveness in global markets and our leadership capabilities.

Now, a lady President, Managers, Senators, Congresswoman, e.t.c.
Do you think that this scenario is now happening in this world today?

Invest In Real Property

By: Ryan
April. 13, 2010
Posted in: Real Property

Once you decide to invest in real property, you probably will be eager to buy something quickly and put your money to work. Many new real estate investors underestimate the complexity of the field and overestimate how much they know about it.

Immerse yourself in a study of real estate as you would any new business venture. talk with other investors and brokers; that will help you pinpoint the neighborhoods with the best investment potential. Seek out areas that have begun to gain favor among young householders as an alternative to more expensive established neighborhoods.

Look for good transportation, shopping and schools and a strong, diversified employment base.
Then you can narrow your search to specific properties. your best ally is likely to be a broker who is knowledgeable about your chosen area. check his or her reputation with local banker and attorneys. discuss with the broker your debt limit and investment standards.

Other sources of sale properties are newspaper real estate sections. if you find a property that approaches your standards, investigate it thoroughly. Look for a modern furnace. Be alert for sign of trouble. You can confirm the stated age of a building by looking inside the toilet tank; most are stamped with their date of manufacture. Or look for a city building inspector's sticker.

Before investing in a rental house or apartment building, always ask yourself.

Does it make financial sense for you?
Can you really afford the initial cash outlay?

Careful Shopping for Car Insurance

Your Auto Policies

By: Ryan Reyes
Date: April. 10, 2010 @ 9:30 A.M.

Categories: Insurance Policy

Tags: Insurance, Salesmen, Attorney, Uninsured motorist, Medical Policy

Yes it is, car insurance is more important than ever. Insurance salesmen naturally try to sell their standard, fully loaded policy. It contains six basic types of coverage.

Listed are:

1. Bodily Injury
2. Property damage
3. Uninsured motorist
4. Medical payments
5. Collision
6. Comprehensive

Don't skimp on bodily injury liability and property damage liability coverage. If you or anybody driving your car with your permission is in an accident in which someone is killed or injured, bodily injury liability coverage pays you for an attorney to depend against lawsuits by victims of an accident.

It also pays other court cost and any judgments against you. Property damage liability covers property that you do not own. If you have substantial assets that could be seized in a court to pay off a judgment that exceeds your auto coverage, you should consider an additional umbrella policy.

In some states, you are required to buy uninsured-motorist coverage. It pays you for injuries caused by a hit-and-run driver or someone who cannot pay a judgment. Yet if it is not required and if you have adequate health and disability insurance where you work, you may not need uninsured-motorist coverage, nor medical payments coverage.

Both may largely duplicate protection already supplied by your regular medical policy.

Your Biggest Investment

Giving Your house Its Semi-annual Physical

By: Ryan Reyes
Date: April 9, 2010 @ 11:00 A.M.

Categories: Housing Maintenance

Tags: Painting, Repair, Houses, Inspections

"A house is a home, shelter, building or structure that is a dwelling or place for habitation by human beings."

Every spring and autumn is the time to save money, and protect what is probably your biggest investment, by giving your house its semi-annual top-to-bottom physical examination. No matter how invulnerable your home may look, hazard to its health lurk almost everywhere. So it pays to head off problems in the early stages by practicing preventive maintenance. If you take care of your house, it will take care of you. In sum, you will get more for it when you sell it.

The best way to handle maintenance chores is to put them on a schedule. For newer houses and those in mild climates, an annual inspection tour should suffice. but if your house is more than 10 years old or has to weather ice and snow, you are wise to make quarterly checkups.

You also can save both time and money by repairing your house in stages rather than all at once. The south side usually needs painting every three to six years. The other side require it only every eight to ten years.

Playing the Riskiest Game

By: Ryan Reyes

Date: April 8, 2010 @ 8:01 A.M

Categories: Commodities

Tags: Risk, Amateur traders, Investment

For those who yearn for the fastest, toughest, highest-risk financial game of all, there are commodities. As many as 90% of all amateur traders lose money and drop out within a
year, and the only consistent winners are the brokers who charge you commisions.

Still, if you crave excitement and have a cast-iron stomach, commodities trading can offer impressive gains for that tiny portion of your investable funds that you are willing to put
completely at risk-your mad money. But unless you are an expert, never put more than a nickel or dime out of every investment dollar into commodities.

Small investors who speculate in commodities make two major mistakes. Many of them operate on the basis of tips; they are often wrong, and the amateurs cannot hope to match the professional traders for access to update, accurate information about markets. Small investors also tend to be undercapitalized.

To stay in this game, you should have a dollars in reserve, ready to commit, for every dollar you put up.