Why technical analysis is more important now than ever before
Technical analysis is widespread in the world, covering all layers of the financial and non-financial community. Technical analysis is still a highly sought after skill in 2020. As part of a truly global skill, the financial market continues to prioritize this type of analysis, helping to trace each asset class. Eddie Tofpik, head of technical analysis and senior market analyst at ADM Investor Services International, provided interesting information and his views on technical analysis. He also explains the importance of the Society of Technical Analysts (STA) and its impact on the financial world. Journalists of the international financial resource “Finance Magnates” were interested in his opinion.
How does technical analysis differ in different regions?
Technical analysis has a wide and varied distribution at the international level. It reaches out to all layers of the financial and non-financial community, from individual retail traders and investors through financial and non-financial companies, who use it to manage exposure across all types of products, right up to large national and multinational banks, corporations and governments.
The results of technical analysis are used by many government leaders. They need a wide variety of data to make responsible decisions. However, there are differences in the methods of technical analysis depending on the region in which the country is located. In fact, technical analysis of price changes originated in Japan. Now these are well-known Japanese candlesticks. In the mid-eighteenth century, Homma Munehisa, a Japanese rice trader and financial trader, invented an interval chart used to display changes in stock prices, commodity prices, and more.
This is still very, very strong in Asia, while in the US there are many who adhere to relatively recent theories such as Dow Theory by Charles Dow, Elliott Wave Theory, Gunn, and most recently Market Profile by J. Peter Steidlmeier.
What makes emerging markets unique compared to the established market in Europe?
In technical analysis, the most important thing is data. Quotes of currencies, stocks, prices of metals, energy carriers, raw materials, products, goods. It is important to know the opening prices, closing prices, highs and lows, trading volumes and everything else associated with this. In developed markets, these data are always available in full and are very reliable, as they are obtained from various sources. In emerging markets, quotes for currencies, commodities or stock market prices are not readily available. And this data is not reliable enough.
However, this is changing, and while in the past in some markets, technicians have puzzled over how to figure out what is going on — this is no longer the case these days! Emerging markets need to be considered separately. The fact is that they are little studied from the point of view of technical analysis. Therefore, they are cleaner and technically more responsive markets. There is less speculative component here. In developed markets, a huge number of traders see and understand the figures of technical analysis, act in accordance with them, which has a negative impact on price dynamics.
How does technical analysis for cryptocurrency differ from other asset classes?
There are several unique challenges to technical analysis of cryptocurrencies. If we take for example a common currency pair such as the euro against the US dollar (EUR / USD), we have a fragmented and liquid market that trades almost everywhere and always.
Although true volume is not available, it does have definite or at least acceptable values for the daily open, high, low, and close. This does not apply to cryptocurrencies. They are traded 24 hours every day of the year. How do you determine all these values? This makes technical analysis of cryptocurrencies difficult, but possible. Technical analysis works on bitcoin. The principles of behavior of financial instruments are very similar.
What are the benefits of STA?
STA is one of the largest and oldest technical analysis organizations in the world. Founded in 1969, it has approximately 1,100 members of various degrees worldwide. Full members receive their diplomas after passing two exams. There are associate members without exams and fellows.
Anyone can join, be it a student, a private investor or a financial professional. Fee from £ 70 for an associate member to £ 90 for a full member. There is also a thriving international membership. Membership as a Full Member or Fellow entitles you to use the MSTA or FSTA after their name. Associate Members, Members and Fellows enjoy the benefits of 11 monthly meetings in the City of London, the benefits of training and Gold Standard exams at the STA Education Department.
Those unable to attend can view the meetings online, there is an online student forum, an ezine twice a year, and access to a library of over 1,150 books. TA and software books. Finally, the STA is approved by the Chartered Securities and Investment Institute (CISI), and members can earn CPD for attending lectures and seminars. In terms of diploma, it is the gold standard of technical analysis courses, which allows those who pass the exams to be called a qualified technical analyst.
Technical Analysis Trends in 2020
This is an interesting question in these strange times. There are many useful traditional forms of TA. However, it should be said that one of the most popular recent developments that is often written and talked about is Ichimoku, or more precisely, Ichimoku Kinko Hyo from Japan.
One of the most respected technical analysts in the world, John Murphy of the United States, has made a strong case for intermarket technical analysis. In addition, there are Trevor Neil’s relative rotation charts, which seem to be quite popular, and, finally, the work of W. D. Gann and especially “Financial Schedule”, created in 1909, and which is still quite relevant today.