5 Key Technical Analysts in the World

Like a prima donna, technical analysis has become a favored model of analysis among many traders. Thanks to the ease and simplicity it offers, it is no wonder that this analysis remains a favorite to this day. In fact, its popularity is a notch higher than that of fundamental analysis.

However, have you ever wondered how technical analysis was first used and popularized? The history of the creation of technical analysis is led by five important figures. Despite the myths surrounding technical analysis that often arise, the existence of technical analysis now enhances traders' daily activities thanks to the ease it offers. So, who are they?

1. Charles Dow

The embryo of the most important analysis began in the late 19th century. At that time, Charles Henry Dow, a reporter for a financial magazine in New York, published several price prediction guidelines using historical stock movement data. Dow recorded all stock price movements, whether daily, weekly, or monthly.

He then related it to the ebb and flow patterns of the market. From there, Dow was able to state that the price patterns formed in the market tend to repeat and can be predicted from previous events. Thanks to this discovery, Dow is ultimately known as the Father of Technical Analysis and the first important figure in analysis.

Before being recognized as the first pioneer of technical analysis, Dow learned a lot about the financial world and stocks. After three years of working as a financial reporter, in 1882, Dow founded his own magazine business together with Edward D. Jones.

Starting in 1884, Dow's interest in the stock world grew stronger after he introduced the first stock market index titled Railroad Average. Then, in 1896, he published a new index called Industrial Average, which consisted of the most speculative stocks on the exchange. This index later became known as the Dow Jones Industrial Average (DJIA).

2. William Hamilton

William Peter Hamilton is the second most important figure in analysis after Charles Dow. He complemented Dow Theory, the technical analysis theory popularized by Charles Dow in the 19th century. In short, Dow Theory itself is a theory that explains that trends serve as indicators of the overall market condition, especially in the stock market.

However, since Dow could not explain trend indications in more detail, William Hamilton attempted to apply Dow Theory to stock indices. As a result, the terms bullish (uptrend) and bearish (downtrend) were created.

According to Hamilton, Dow Theory only describes a set of trends in the market that are not clearly applicable, thus not considered effective for "beating" the market. However, Hamilton himself could not find "what" should be used to read trend movements. Hamilton only conveyed an important note: trading activities should not be influenced by emotions but should be accompanied by an objective attitude and seeing what is there; not what one wants to see.

3. Robert Rhea

The third most important figure in analysis and the pioneer of "practitioners" is Robert Rhea. Unlike William Hamilton, who was still within the bounds of studying Dow Theory, Rhea created a new innovation by turning Dow Theory into a practical indicator to assist traders during entry. In practice, Rhea successfully used this theory to identify Tops and Bottoms, ultimately gaining profits.

Rhea the practitioner successfully predicted the market Bottom level in 1932, while the Top level was analyzed in 1937. News of his innovation in updating Dow Theory eventually influenced the number of subscribers to his investment newsletter, Dow Theory Comments. Unfortunately, Robert Rhea passed away two years after successfully identifying the Top.

4. John Magee

The next important figure in analysis is John Magee. He is the only pioneer of technical analysis who dared to trade solely based on stock price movements and price patterns. Magee did not read newspapers at all, ignoring fundamental analysis. For Magee, this helped him avoid a series of news that could disrupt his analysis.

Armed only with charts and chart patterns, Magee proved his success as a technical trader for four decades. Over time, the trading strategy employed by Magee became known as Naked Trading.

In addition to being recognized as one of the most important figures in technical analysis, Magee is also known as the chartist. He pioneered trading using chart patterns that were his own discoveries. John Magee's chart patterns are distinguished in forms such as triangles, flags, shoulders, bodies, and so on.

These forms created by Magee are the embryos of the Triangle, Flag, and Head and Shoulders patterns. To ensure his analysis could be read by many other traders, Magee, along with Robert D. Edwards, published a book titled Technical Analysis of Stock Trends in 1948.

5. Edson Gould

The last and longest-lived important figure in analysis is Edson Gould. He is recorded as the pioneer of technical analysis with the longest track record and a "forecaster" of trends with a high level of accuracy.

At that time, he could predict the rise of the Dow Jones stock index by 400 points in the upcoming 20-year bullish market. Additionally, he also stated that Dow Jones stocks could exceed 1,040 by 1973 and beyond. Gould was able to present quite accurate analysis because he used charts, market psychology, and technical indicators. From here, you can conclude that the components of technical analysis were created during Edson Gould's analysis.

Throughout his 81 years of life, Gould never stopped analyzing to support his trading activities. Moreover, he was also active in his profession as a newsletter writer. Reportedly, Gould's writings sold for USD500 in 1930.

Modern Technical Analysis

The appearance of this analysis can indeed be quite confusing, not to mention the candlestick charts with their various patterns. There are also many types of technical analysis indicators. Currently, there are technical indicators called Moving Average (MA), Moving Average Convergence Divergence (MACD), Bollinger Bands (BB), and Stochastic.

MA is used to analyze the average price movement over several previous periods. MACD is used to identify buy or sell signals obtained by looking at the relationship between long-term and short-term MAs. BB is an indicator that involves calculating price volatility. Essentially, this indicator is used to analyze whether the market is busy or calm. Thus, you can determine the strategy to be used in the market. Stochastic can be used to compare the last closing price with the range of lowest or highest prices over a certain period.

For most traders, technical indicators are considered to provide information on forex price movements more realistically. This is because prices are displayed in various chart models, complete with their indications. Additionally, the use of additional technical indicators is considered to complement the chart, making the analysis appear more accurate.

However, you should not overly glorify technical analysis. There are several points you need to be aware of, including:

• First, because it is considered easy and simple, many traders end up using this analysis "without additional weapons". In reality, success in forex trading is not enough if it only relies on technical analysis.
  
  
• Second, you also need to consider market movements when trading. Market movements themselves are a reflection of market conditions caused by various factors. For example, natural disasters, politics, economics, and market psychology. Such market considerations are known as fundamental analysis.