The Evolution of Technical Analysis

A comprehensive history of the evolution of technical analysis from ancient times to the Internet age Whether driven by mass psychology, fear or greed of investors, the forces of supply and demand, or a combination, technical analysis has flourished for thousands of years on the outskirts of the financial establishment. In The Evolution of Technical Analysis: Financial Prediction from Babylonian Tablets to Bloomberg Terminals, MIT's Andrew W. Lo details how the charting of past stock prices for the purpose of identifying trends, patterns, strength, and cycles within market data has allowed traders to make informed investment decisions based in logic, rather than on luck. The book Reveals the origins of technical analysis Compares and contrasts the Eastern practices of China and Japan to Western methods Details the contributions of pioneers such as Charles Dow, Munehisa Homma, Humphrey B. Neill, and William D. Gann The Evolution of Technical Analysis explores the fascinating history of technical analysis, tracing where technical analysts failed, how they succeeded, and what it all means for today's traders and investors.

Introduction vii Chapter 1: Ancient Roots 1 The Beginnings 2 Ancient Babylon 5 Ancient Greece 11 Ancient Rome 15 Negative Attitudes toward Traders 18 Chapter 2: The Middle Ages and the Renaissance 21 Western Europe 22 Technical Analysis 32 Societal Attitudes 39 Chapter 3: Asia 43 Japan 44 China 49 Chapter 4: The New World 59 Wall Street 60 Societal Attitudes 73 Chapter 5: A New Age for Technical Analysis 81 Dow Theory 82 Relative Strength 91 Market Cycles and Waves 92 Chart Patterns 94 Volume of Trading 96 Market Breadth 99 Nontechnical Analysis 99 Chapter 6: Technical Analysis Today 105 Trends 106 Patterns 109 Strength 111 Cycles 112 Wall Street’s Reinterpretation of Technical Analysis 114 Chapter 7: A Brief History of Randomness and Efficient Markets 131 Prices As Objects of Study 134 The Emergence of Efficient Markets 137 What is Random? 141 Chapter 8: Academic Approaches to Technical Analysis 149 Theoretical Underpinnings 150 Empirical Evaluation 151 Adaptive Markets and Technical Analysis 161 Notes 167 Bibliography 191 Acknowledgments 199 About the Authors 203 Index 205