This issue features an in-depth examination of Web-based technical analysis services by Wayne Thorp. Technical analysis covers a variety of techniques that study relationships between a stock’s past price and volume movements and patterns to forecast security and market price direction. Typically, these patterns are charted. Technical analysis is well-suited to computerization; it involves the manipulation of a large amount of data. Technical analysis software allows investors to quickly obtain data and plot it, applying various technical indicators such as moving averages. The better systems also allow investors to test the success of various strategies on historical data (backtesting). What once would have taken many hours, if not days, can now be accomplished in minutes.
In contrast, fundamental analysis refers to the process of selecting stocks based upon underlying economic trends and long-term expectations of future company performance. Fundamental analysis revolves around projecting growth in factors such as sales, cash flow, earnings and dividends.
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