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The Efficient Market Theory says that security prices accurately reflect any and all information that exists about that security. Further, the theory states you cannot consistently outperform the stock market because information arrives randomly into the market, and prices adjust instantly to take account of it. The result should therefore be that the market correctly prices all securities at all times - i.e. you cannot profit from an under or overpricing because the market will correct the imbalance too quickly. Obviously, this implies that any analysis, either fundamental or technical, is worthless. Fortunately for traders, it is the theory which is wrong in this case, as any market essentially moves according to the flows within its 'expectation machine', making price movements in many cases 'self fulfilling prophecies'. From a day trading system perspective, efficient market theory will therefore be of limited use.

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