Technical analysis is a method of evaluating financial assets that uses mathematical calculations based on prices, trading volumes, or open interest in futures and options. Does technical analysis matter? JP Morgan economists analyze the technical aspects of market forecasting.
Technical indicators have been reliable signals of short-term market behavior
The problem with technical analysis is that, although it can be very effective in predicting daily behavior, it is less useful when looking into the more distant future. For this, fundamental indicators are much more effective: for example, forward valuations of the S&P 500 have historically explained almost a third of five-year annualized returns.
Consequently, professional day traders can benefit more from technical analysis, while long-term investors will find more fruitful results if they rely on fundamentals. In other words, technical analysis is important, but its limitations must be recognized.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
