Computers and Technical Analysis
The computational demands of technical analysis restricted its adoption and growth until the mid-1960s. Dow Theory and rudimentary charting techniques began in the 1890s, but the availability of reasonably priced calculators and computers, and easy access to price and volume data propelled technical analysis into prominence just a few decades ago.
The ability to calculate and plot basic indicators, such as moving averages, fueled interest in technical analysis. Then, personal computers and standalone software packages that digested data culled from the financial pages of newspapers made it available to a broad audience. The now-ubiquitous Internet and high-speed connections have made the dissemination of online financial information, charting, screening, and new technical analysis techniques speedy, efficient, and practical.
Methods and systems can now be easily backtested, and either proven effective or discredited in just a few hours. Ease of global communication has helped spread knowledge and adoption of U.S. and non-U.S. derived techniques, such as candlestick charting. Technicians around the world collaborate enthusiastically to refine existing approaches and indicators, and to create new indicators and trading systems.
So, what are the most popular tools in the technical analysis toolbox? How do technicians evaluate technical indicators to determine when to buy, sell, or hold? This chapter introduces the most popular technical analysis tools. ...
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