Humanity's understanding of the fluctuation patterns of the stock market is a very challenging world-class problem. So far, no theory or method has been convincing and can stand the test of time. In 2000, the famous economist Robert Shiller pointed out in the book "Irrational Prosperity": "We should keep in mind that Stock market pricing has not formed a perfect science; in 2013, the Royal Swedish Academy of Sciences pointed out when awarding Robert Shiller and others the Nobel Prize in Economics that year: There is almost no way to accurately predict the stock market and bond prices in the next few days or weeks. market direction, but it may be possible to predict prices for more than three years through research.
Currently, the representative theories on financial asset pricing and stock market fluctuation logic mainly include the following: Keynesian Beauty Theory, Random Walk Theory, Modern Portfolio Theory (MPT), Efficient Market Hypothesis (EMH), Behavioral Finance (BF), Evolutionary Securities (EAS), etc.
Divided from the characteristics and perspectives of research paradigms, there are three main analysis methods in the field of stock investment: basic analysis, technical analysis, and evolutionary analysis.
Just like there are fundamental differences in epistemology and methodology between traditional Chinese medicine and Western medicine in the medical field, the above three analysis methods are also based on completely different theoretical systems and logical structures, and their main research objects only focus on market operations. A specific aspect or category has its rationality and limitations, but they are all indispensable for a comprehensive understanding and in-depth exploration of the operating laws of the stock market. The theoretical foundations, premise assumptions, and paradigm characteristics they rely on are different. In practical applications, they are both related to each other and have important differences.
The interrelationships are mainly reflected in the specific operational level of investment decision-making - technical analysis must be supported by basic analysis to avoid "seeking fish by mistake", and technical analysis and basic analysis must be integrated into the basic framework of evolutionary analysis to improve its scientific nature. , applicability, effectiveness and reliability!
The important difference is mainly reflected in the philosophical level of how to understand the relationship between people and the market - the technical analysis school believes that the market is right, and the stock price trend already contains all useful information. Its basic concept is to "follow the trend and correct errors in time." "; The fundamental analysis school believes that their own analysis is correct, and market errors will often occur. Their basic idea is to take advantage of market errors to "buy at low prices and hold them for a long time." Starting from the ideological point of view, we believe that there is no absolute right or wrong in the market and investors, whether in form and content (enterprise value, market valuation) or in time and space (overestimation, underestimation, overbought and oversold). The universal, constant, and unified evaluation standard depends to a large extent on the co-evolution process of human weakness and market ecology. Its basic concept is that "everything is based on the consideration of biological instincts and evolutionary laws."
It is worth mentioning that Elliott Wave Theory is one of the most important technical analysis theories. If Dow Theory tells people what the sea is, then wave theory guides you how to surf on the sea.
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