The Heretics of Finance: Conversations with Leading Practitioners of Technical Analysis

Introduction

How did two technical-analysis dilettantes—steeped in the theory of efficient markets, the random walk hypothesis, and all the other tenets of quantitative finance—end up interviewing fourteen leading technical analysts about their trade? To answer that, we must begin with a disclaimer: we are not practicing technical analysts, or "technicians," as professionals prefer to be called. To those who are familiar either with our research or with technical analysis, this will come as no surprise. But our fascination with the craft and culture of technical analysis, especially as it contrasts with quantitative analysis, has led us down a path of discovery and delight. We have had the pleasure and privilege of meeting with some of the most talented, and the most gracious and decent, individuals in the business.^[1] And we have learned a great deal indeed about technical analysis, as it is practiced by the pros.

But how did our paths with these professionals finally cross? After all, technicians do not frequent the halls of academia, nor do they usually consort with finance professors or their students. This separation is understandable, given the disdain and disrespect most academics have for charting, which has been characterized by more than one academic with the following analogy: technical analysis is to financial analysis as astrology is to astronomy. Technicians have, on occasion, made use of astrological signs (see, for example, Weingarten, 1996), a practice which does ...