What are the steps to ensuring data accuracy in Technical Analysis?

1 Check the source

The first step to ensuring data accuracy in technical analysis is to check the source of the data. The source should be reputable, reliable, and transparent. It should provide data that is timely, consistent, and comprehensive. For example, if you are using a data provider that offers historical price data for various markets and instruments, you should verify that the data covers the relevant time frames, frequency, and adjustments. You should also check if the data is based on actual trades, quotes, or estimates, and if it includes any fees, commissions, or spreads.

2 Validate the data

The second step to ensuring data accuracy in technical analysis is to validate the data. This means checking if the data is free of errors, outliers, or anomalies that could distort the analysis. For example, if you are using a data set that contains daily closing prices for a stock, you should check if there are any missing, duplicated, or incorrect values. You should also check if there are any extreme or unusual price movements that could be caused by factors such as splits, dividends, or corporate actions. If you find any issues with the data, you should either correct them, exclude them, or adjust them accordingly.

4 Test the data

The fourth step to ensuring data accuracy in technical analysis is to test the data. This means applying the data to various technical analysis tools, methods, and strategies to evaluate their performance and validity. For example, if you are using a data set that contains prices for a stock, you should plot them on a chart and apply some technical indicators, such as moving averages, trend lines, or oscillators. You should then analyze how the indicators react to the price movements, how they signal potential trading opportunities, and how they measure risk and reward. You should also backtest some trading strategies based on the indicators and see how they perform in different market conditions.

6 Verify the data

The sixth and final step to ensuring data accuracy in technical analysis is to verify the data. This means comparing and cross-checking the data with other sources, tools, or methods to confirm its accuracy and reliability. For example, if you are using a data set that contains prices for a stock, you should compare it with other data providers, platforms, or brokers that offer the same or similar data. You should also compare your technical analysis results with other analysts, traders, or experts that use the same or different technical analysis tools, methods, or strategies. You should then assess if there are any discrepancies, divergences, or confirmations between the data and the analysis.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?