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ANALYST FOCUS
Analyst Interview: Patricia Elbaz puts 5 questions to Murray Gunn Patricia Elbaz MSTA Technical Analyst & Lecturer
Murray, it’s always good to see young graduates starting in banking and various finance roles, taking an interest in Technical Analysis. How were you first introduced to Technical Analysis? As an Economics graduate, I entered the financial markets thinking that they behaved rationally but quickly realised that they don’t. Thankfully, I soon had the great fortune of working with technical analysis legend Tony Plummer at Hambros Bank from 1992. One of my first assignments was to live-test a futures trading system based on momentum. It was a revelation to see that profits could be harvested from the markets without any “fundamental” input at all. That, and Tony’s seminal work, Forecasting Financial Markets, put me on the path of investigating just what was the underlying driver of price movement. Tony pointed me in the direction of the Society of Technical Analysts, and I was also introduced to Robert Prechter’s work on the Elliott Wave Principle around the same time. I was hooked. Murray Gunn MSTA Murray Gunn MSTA is Head of Research for Elliot Wave International’s Global Market Perspective, a monthly summary of the firm’s 25 analysts’ views on every major freely traded market in the world. (You can follow his Elliott Wave analysis at www.elliottwave.com) A published author on technical analysis, Murray holds the MSTA, is a Certified Financial Technician (CFTe) and has been investing and trading with technical analysis since the early 1990s. Murray is a former member of the board of the STA.
What indicators would you recommend using when starting to learn about Technical Analysis? Price! Every indicator is a derivative of the raw price and so it makes sense to start with the source. The Elliott Wave Principle is, of course, based on patterns in the price of a market but there are other price-based methods which are very useful to gain an understanding of what is going on. R N Elliott added a forecasting element to Dow Theory and so an understanding of that is essential. Japanese Candlesticks give a splendid education on psychology. Point & Figure takes us back to tape reading which is essentially looking for price patterns as well. An appreciation of how volume (and open interest) relates to price movements should also be a staple for the beginner. A number of traders have said that they find technical analysis very useful for short-term trading and outlook. Would you agree with that or do you think that a long-term time frame is just as significant? In the 1930s, R N Elliott discovered that the markets have a fractal design, meaning that patterns in price repeat at every time scale. This makes an understanding of where a market sits in its long-term cycle critical. It could be termed a “top-down” approach where the starting point is to appreciate the direction of the tide. Then
