What is the problem with time lags in technical analysis and

What is the problem with time lags in technical analysis and why may the analysis lead to self-fulfilling predictions?

Solution

Under Technical analysis only only price chart is studied based upon technical analysis theory and study such as chart pattern like candle stick , line , studies like Volume, moving average, momentum , retracement etc. All these are studied to determine the fufture price movements of share. But it completely ignore the fundamental which derive the price. Analysis of macro and micro factors that affect the functioning of firm Macro factor includes the industry scenario , international & domestic market and demand supply dynamics.

There are several difficulties involved with exploiting intermarket relationships . First week intermarket cause and effect relationships have time lags . This difference in the timing of peaks and throughs among related market is called a Time Lag. The problem is that the time lags are neither constant nor consistent.

A second difficulty is that has its supply and demand forces which will often distort the usual intermarket relationships . For example we would expect copper and gold prices move up or down at about the same time. Thus any system built on intermarket forces will not be correct all the time.

A third problem is the internal technical condition of each market. Each market can become overbought and oversold at different times . The usual intermarket trends are broad trends which could unfold over many months . hence very short term trends in the market can move opposite the cause and effect relationships Such movement can complicate your entry signal .

All these issues influence the precise form of relationship you select for your system.