After all, it makes little sense to trade based only
on past price movements when other information is also available.
The extent of the initial plunge raised new fears that some investors who tend to track
past price movements of stock indexes would conclude that the nine - year - old bull market has run its course, making the recovery later in the day somewhat important from that perspective.
All the information
like past price movements, financial statements (balance sheet, income statement, annual sheets etc), corporate announcements (like earnings, dividends, bonus etc), economic factors -LRB-(inflation, employment etc) already reflects in the share price.
When aspiring Forex traders apply lagging price indicators to their charts they really are just clouding over the important information, an indicator that visually
represents past price movement is not going to tell you anything that you can't already see from knowing how to analyze price action.
Perhaps then by grounding investment decisions in something knowable and intrinsic to a business — even something as simple as its book value — you can do better than basing decisions
on past price movements or predictions regarding how extrinsic factors may impact its business.
Momentum investors know that there are actually three phenomena observed in
past price movement: short - term reversals in the first month, medium - term momentum over the next 12 months and long - term reversals over a 3 to 5 - year period.
It is mostly focused on
the past price movements of the stock.
This type of investment analysis is the study of
past price movements, short - term timing, trends and price patterns, to help predict future market direction.
The weak form EMH directly challenges the technical analysts whose trades are based on
the past price movements and chart trends.
It should be remembered, however, that this is all very anecdotal, and in no way do I believe that
past price movements have predictive power.
Another troubling factor is that
past price movements are very poor predictors of the future.