Abstract:
One of the tools in financial forecasting is technical analysis where patterns that predict
future prices and market behavior are identified from past market data. Technical analysis uses charts
to identify predictive patterns - it can be applied to the analysis of prices of stocks, currencies, precious
metals, commodities, various indices, futures, or financial derivatives. The underlying assumption is that
the current price is the summary of all information available, that price movements are a combination of
random fluctuations and periods of non-random patterns, and that accurate forecasting can be performed
without knowing the specific reasons that cause price changes. Technical analysis often fails to forecast
disruptive events, such as formation of bubbles, crises, and emergence of systemic risks.