To begin with, there are three general areas of focus in TA. One is based on price action, and usually volume, and can be approached either through tape reading or charts. The second is based on pattern recognition, popularized and codified by Schabacker. The third is based on "indicators", i.e., mathematical manipulations of price such as RSI, MACD, stochastics, etc. "TA", therefore, becomes a loaded word and triggers reactions based on what one associates with the word, and the associations which one applies may be very different from the associations applied by someone else. Which is why discussions of "TA" rarely get anywhere unless somebody establishes what is meant by the term.
Fundamental Analysis isn't affected by the same confusion since everyone understands that it addresses "fundamental" issues such as earnings, sales, cash flow, etc., though any given fundamental analyst may stress one aspect of the balance sheet over another.
Comments such as "TA doesn't work", therefore, have no meaning in and of themselves. One must define just what it is that he believes doesn't work, which leads to the system.
The system must provide an edge, meaning that it must provide a better-than-chance outcome of executions over a period of trades long enough to yield reliable data. Regarless of how good the system is, though, there is always the chance that the next trade will fail since the system can tell you only that, over time, you will have X% success, not which specific trades will be successful and which won't. The problem many traders have is their inability to take every trade. They try to guess in advance which will be successful and which won't, i.e., they try to beat their own systems, which pretty much negates the advantage of having a system in the first place.
Therefore, when looking for theoretical bases, you've got two general avenues of inquiry, one having to do with probability and the other having to do with certain aspects of psychology, such as behavioral and developmental. But all this would entail quite a lot of work, and may not be worth the effort to you. If it is, you could start with Magee's "Winning the Mental Game on Wall Street", Douglas' "Trading in the Zone", and Taleb's "Fooled by Randomness".
Fundamental Analysis isn't affected by the same confusion since everyone understands that it addresses "fundamental" issues such as earnings, sales, cash flow, etc., though any given fundamental analyst may stress one aspect of the balance sheet over another.
Comments such as "TA doesn't work", therefore, have no meaning in and of themselves. One must define just what it is that he believes doesn't work, which leads to the system.
The system must provide an edge, meaning that it must provide a better-than-chance outcome of executions over a period of trades long enough to yield reliable data. Regarless of how good the system is, though, there is always the chance that the next trade will fail since the system can tell you only that, over time, you will have X% success, not which specific trades will be successful and which won't. The problem many traders have is their inability to take every trade. They try to guess in advance which will be successful and which won't, i.e., they try to beat their own systems, which pretty much negates the advantage of having a system in the first place.
Therefore, when looking for theoretical bases, you've got two general avenues of inquiry, one having to do with probability and the other having to do with certain aspects of psychology, such as behavioral and developmental. But all this would entail quite a lot of work, and may not be worth the effort to you. If it is, you could start with Magee's "Winning the Mental Game on Wall Street", Douglas' "Trading in the Zone", and Taleb's "Fooled by Randomness".
