I have a special interest in back-testing. Several years ago I downloaded ten years of stock price data on over a hundred companies and wrote a program to iterate through possible patterns. The result I invariably found was a perfect bell curve of possible outcomes after each pattern. The only slight bias I found was that a stock which has been moving up for more than a year had a slightly greater chance to continue moving up and a stock that has been moving down for a year or more would be slightly more likely to continue down. That slight bias was very small and would be dwarfed by a commission.
Obviously anything significant would make someone rich very quickly but I didn't find anything. It makes sense that any biases (if there are any) would already have been found and would have made the person who wrote the software filthy rich. I doubt that there are any patterns to be found.
For all the people thinking about buying 'stock timing' software, they should ask themselves: if the software actually can improve gains, why doesn't the writer of the software make millions or billions from the stock market rather than spending money on marketing to try to get someone to buy the software for $99? Obviously it would be easier to set up a computer to make the trades rather than going through the marketing. I often wonder if the software writers embed 'Strong Buy' indicators at certain times so they can additionally profit from anyone who believes in the software.
I don't give any credence to technical analysis and certainly if TA works for a person or that person thinks it works for them, I wish them well. However, it never hurts to go through a company's financial statements to make an assessment that way. Ultimately it's all about trying to match the stock price with the best guess of the cash flows that investment will return to the shareholder. If the value of the future cash flows to the shareholders end up being more than the share price, in the end shareholders will make money. If not, in the end shareholders will lose money.
