Hi,
This is trilateral. I am fairly new to the stock markets... hardly an year. Technical analysis has fascinated me a lot and in this regard, I would like to post a question to the Technical Analysis Gurus we have among us.
Suppose a trading opportunity exists and lets say one particular indicator has already revealed this opportunity. Now people who are actively following this indicator would certainly try to take advantage of the situation. Imagine the case of a much popular indicator, say MACD which is tracked by quite a lot of analysts. If this indicator gives of a signal, one can be fairly certain that this opportunity is going to be exploited by the masses in general. In such a case wouldn't this indicator become the reason for its own success as time progresses
To make myself more clear - Lets say MACD gives a buy signal on a certain scrip. People who are monitoring this scrip, would be interested in entering it and the increase in demand due to this results in price increase which in turn triggers the indicator to move further into positive territory.
Cycle of price changes
(1). Price Increases --> Indicator Gives buy signal --> Price increases again --> Indicator Gives buy signal ...
This loop continues till some external factor(a natural calamity/poor rainfall etc) or a strong fundamental factor (quarterly results below expectations) causes the price to fall abruptly. In this case,
the loop becomes modified as follows
(2). Price Decreases --> Indicator Gives sell signal --> Price Decreases again --> Indicator Gives sell signal... and the loop continues from step(1)
Please don't get me wrong... I'm not saying that technical analysis is wrong. My intention is only to to reinforce my belief (and perhaps the belief of any novice reading this post) in this technique, by questioning it and proving it correct
Regards
Trilateral
This is trilateral. I am fairly new to the stock markets... hardly an year. Technical analysis has fascinated me a lot and in this regard, I would like to post a question to the Technical Analysis Gurus we have among us.
Suppose a trading opportunity exists and lets say one particular indicator has already revealed this opportunity. Now people who are actively following this indicator would certainly try to take advantage of the situation. Imagine the case of a much popular indicator, say MACD which is tracked by quite a lot of analysts. If this indicator gives of a signal, one can be fairly certain that this opportunity is going to be exploited by the masses in general. In such a case wouldn't this indicator become the reason for its own success as time progresses
To make myself more clear - Lets say MACD gives a buy signal on a certain scrip. People who are monitoring this scrip, would be interested in entering it and the increase in demand due to this results in price increase which in turn triggers the indicator to move further into positive territory.
Cycle of price changes
(1). Price Increases --> Indicator Gives buy signal --> Price increases again --> Indicator Gives buy signal ...
This loop continues till some external factor(a natural calamity/poor rainfall etc) or a strong fundamental factor (quarterly results below expectations) causes the price to fall abruptly. In this case,
the loop becomes modified as follows
(2). Price Decreases --> Indicator Gives sell signal --> Price Decreases again --> Indicator Gives sell signal... and the loop continues from step(1)
Please don't get me wrong... I'm not saying that technical analysis is wrong. My intention is only to to reinforce my belief (and perhaps the belief of any novice reading this post) in this technique, by questioning it and proving it correct
Regards
Trilateral