the area of visual pattern recognition, recent advances in statistical learning theory have had successful applications in fingerprint identification, handwriting analysis, and face recognition. Technical analysis may well be the next frontier for such methods.''
Furthermore, in financial practice technical analysis is criticized because of its highly subjective nature. It is said that there are probably as many methods of combining and interpreting the various techniques as there are chartists themselves. The geometric shapes in historical price charts are often in the eyes of the beholder. Fundamental analysis is compared with technical analysis like astronomy with astrology. It is claimed that technical analysis is voodoo finance and that chart reading shares a pedestal with alchemy. The attitude of academics towards technical analysis is well described by Malkiel (1996, p.139): ``Obviously, I'm biased against the chartist. This is not only a personal predilection but a professional one as well. Technical analysis is anathema to the academic world. We love to pick on it. Our bullying tactics are prompted by two considerations: (1) after paying transaction costs, the method does not do better than a buy-and-hold strategy for investors, and (2) it's easy to pick on. And while it may seem a bit unfair to pick on such a sorry target, just remember: It's your money we are trying to save.''
However, technical analysts acknowledge that their techniques are by no means foolproof. For example, Martin Pring (1998, p.5) notices about technical analysis: ``It can help in identifying the direction of a trend, but there is no known method of consistently forecasting its magnitude.'' Edwards and Magee (1998, p.12) notice: ``Chart analysis is certainly neither easy nor foolproof .'' Finally, Achelis (1995, p.6) remarks:``..., I caution you not to let the software lull you into believing markets are as logical and predictable as the computer you use to analyze them.'' Hence, even technical analysts warn against investment decisions based upon their charts alone.
Fundamental versus technical analysis
The big advantage of technical analysis over fundamental analysis is that it can be applied fairly easily and cheaply to all kinds of securities prices. Only some practice is needed in recognizing the patterns, but in principle everyone can apply it. Of course, there exist also some complex technical trading techniques, but technical analysis can be made as easy or as difficult as the user likes. Martin Pring (1997, p.3) for example notices that although computers make it more easy to come up with sophisticated trading rules, it is better to keep things as simple as possible.Of course fundamental analysis can also be made as simple as one likes. For example, look at the number of cars parked at the lot of the shopping mall to get an indication of