Seven Pitfalls of Technical Analysis

Arbeitspapier

This paper examines the main drawbacks of technical analysis. Although this is widely used by practitioners, from an academic perspective it can only be seen as a form of "voodoo finance". In particular, it runs into the following pitfalls: Subjectivity; Doubtful assumptions; Unjustified algorithms; Low profitability; Data snooping; Statistically insignificant results; Unrealistic simplifications. The key conclusion is that it is high time that (self-fulfilling) technical analysis be replaced by more sophisticated time-series forecasting methods and models such as fractional integration, R/S analysis and autoregressive specifications .

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10213

Classification and Topics

• Classification: Wirtschaft ; Computational Techniques; Simulation Modeling ; Expectations; Speculations ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: technical analysis ; data snooping ; financial markets ; price forecasting ; trading

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Caporale, Guglielmo Maria ; Plastun, Alex
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/271857
• Last update: 10.03.2025, 11:41 AM CET