There are many techniques in forecasting trends these days for stock trading; one that has been around for a number of years is technical analysis. This works by analyzing certain trends; including time period and volume, though mainly focuses on pricing in reference to these. A very complex process in many respects, it tends to center around charts, graphs and dot references.

For many, technical analysis lacks any real theory that underpins it, and is subsequently without credence. However, others argue that its results are justification enough, and point to its correlation to behavioral finance.

Another objection to the technique rests upon how, if it is so sound a function, that automatic trading strategies should be a matter of course in its development; that this is yet to be the case is held up as proof is doesn’t work.

Other arguments against it are heard too; most loudly of all tends to be the fact that evidence of the technique being the reason for a successful strategy are never given; though this is countered by the response that evidence is given, just not understood. A weak argument for many.

In essence though, the arguments for the technique are sound. Anything in life can be analyzed, and lessons learned; history to name but one of course! However, the issue seems to be in the selecting of trends to study, and in the application of strategies taken from them; but market trends do appear; it is just a question of spotting them at the right time.

Whatever side of the discussion that people sit however, one things is generally always agreed upon, (except by the hard line minorities of both camps). And that is that all techniques, including that of technical analysis, should be used to complement each other and to back-up the others results. And this is only prudent after all which, in light of the economic issues of recent years, is only wise.

For more on using stock charts subscribe to our technical analysis newsletter.