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The New Approach of Technical Analysis

There are three major factors that affect stock prices, earnings, interest rate and investor's psychology. In the long term, earnings may be the main driving force for stock prices. Short term, however, investor's psychology or momentum plays a big role in moving stock prices. Technical Analysis, therefore, is used to track the psychology. It does what no other market analysis methodology can do. That is why serious traders and professional investors frequently look toward technical analysis as a valuable trading tool.

Traditionally, charting is the main approach for technical analysis. However interpreting a chart or an indicator is a subjective issue. Even you have the experience, your accuracy is still very limited by looking at a chart, not to mention that the meaningful information is often swamped by the random component of the prices.

In most of the time, stock market is a dynamically changing, stochastic and uncertain environment. Mathematically, stock prices can be modeled as a time series with random components and serial correlation information. Stock prices also have cross-correlation with other factors such as market sentiment, industry strength, fundamental and economic data etc. The correlation information is the scientific foundation of technical analysis.
DeepInsight uses neural networks to capture the correlation for individual stocks, and makes predictions or decisions based on the nearest pattern match. Although such analysis is not a guarantee to be accurate every time, it is truly objective and scientific, and maybe the best possible that people can do when dealing with unpredictable stock markets.

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Books on Market Models, Advanced Technical Analysis and Portfolio Management:
Market Models: A Guide to Financial Data Analysis
by Carol Alexander
Technical Market Indicators
by Richard J. Bauer Jr. and Julie R. Dahlquist
Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test
by A. Lo and C. Mackinlay
Principles of Neural Model Identification, Selection and Adequacy: With Applications in Financial Econometrics
by Apostolos-Paul Refenes, Achilleas Zapranis
Active Portfolio Management
by Richard C. Grinold and Ronald N. kahn

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