TECHNICAL ANALYSIS

Technical analysis began in Japan with a technique called ‘anchor charts’ used in the Kyoto era from 1716. Then in around 1750 a wealthy Japanese business man called Munehisa Homma (a.k.a Sakata) started trading rice markets at the local exchange with these techniques and legend says that he had 100 straight winners without loss! Sakata also invented the early forms of candle charting and during the Meiji period in 1868 modern candlesticks were born and are still one of the most widely used chart types by analysts today.

Later in the U.S Charles H. Dow began to produce technical analysis in the form of a stock market average, and his founding work, known as Dow Theory, is regarded as the very basis of technical analysis.

Technical analysis is the discipline/art of using market generated data to correctly forecast movement in prices. Technical analysis uses market activity, past prices, open interest and volume and is not concerned with the intrinsic value of a security, and therefore it is an attempt to gauge market sentiment.

In the pursuit of using technical charting we must accept basic assumptions that state:

• Market action discounts all known information
• Prices move in trends
• History repeats itself