Technical Analysis

When I first started trading, one of the things that I used to look at is what they called 'fundamental analysis', which is actually looking at the company, for example, Apple, is doing, rather than just what the stock is doing. For example, if the company is bleeding red -- that is, losing money, you make a bet that the stock will soon follow and go down.

If it sounds funny at all that this wouldn't be remotely obvious, during the Internet boom and what with 401K plans, with companies in the red and everybody betting on the Internet, a lot of companies went for years without any profits and their stocks never took a dive ... until the year 2000 and 2001, that is, when the market started tanking.

Technical analysis is not exactly the antithesis to fundamental analysis, but it looks primarily to stock movements, rather than company fundamentals, looking at the chart of the stock prices, etc., to determine how the stock is going to move and what it's going to do day to day.

Technical analysts make up indicators, most of which are calculations based upon the movements of prices, to give value levels to symbolic criteria, with names such as support and resistance, to rationalize what the market has done in the past, and try to determine levels with which they might determine what the market will do in the future, or if it is a wise time to invest or not to invest.

I wasn't too much into technical analysis until I got the book 'Batting .800' by Larry Williams. It was part of a course he had at the time towards investing, and it was quite a good read. He talks a lot about how he views patterns and what he tries to look for as a professional trader.

Towards this end of finding patterns in stock data, I've been thinking of making my own data mining tool, because I've never seen any tools that had the kinds of features that I've wanted in any other data mining tools.