Question

application, issues and challenges of tech analysis in *bond*

Answer 1

There are two primary methods used to analyze securities and make investment decisions: fundamental analysis and technical analysis. Fundamental analysis involves analyzing a company’s financial statements to determine the fair value of the business, while technical analysis assumes that a security's price already reflects all publicly-available information and instead focuses on the statistical analysis of price movements. Technical analysis attempts to understand the market sentiment behind price trends by looking for patterns and trends rather than analyzing a security's fundamental attributes.

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. Unlike fundamental analysis, which attempts to evaluate a security's value based on business results such as sales and earnings, technical analysis focuses on the study or price and volume.

Issues

1. Markets are efficient with values representing factors that influence a security's price, but
2. Even random market price movements appear to move in identifiable patterns and trends that tend to repeat over time.
3. Criticism on assumptions

   1. The market discounts everything

   2. Price moves in trends

   3. History tends to repeat itself

4. Most of the technical traders lose money in the stock market because of the lack of knowledge about the importance of caution a person should have in trading.

Challenges

• Technical Analysis is Subjective

• Emotions - affect a lot of trading decisions and the way a person views markets

• Execution and orders

• Trade management

• Risk Management

• The Imperfection of price patterns