You know the old clichés that begin with "There are two types of ..."?
Well, there are two types of Technical Analysis: the type that attempts to detect a price trend and the type that attempts to predict a price trend. Yes, it's true: not all TA is about prediction.
Whether you are trying to use TA for prediction or detection depends on whether you see "buy low and sell high" (BLASH) as a plan or a goal. For counter-trenders aka trend faders, BLASH is a plan. Counter-trenders are trying to pick tops and bottoms, i.e., they are trying to predict the next trend, which of necessity opposes the current trend (if there is a current trend). So they are countering (or fading) the current trend. Hence, the name "counter-trenders".
For trenders aka trend followers, BLASH is just one of several possible goals. Others are "buy high and sell higher" and "sell low and buy lower". Trenders attempt to detect the current price trend so they can climb on board and ride it to a profitable future. The plan for trenders is "buy strength and sell weakness", strength being an uptrend in price and weakness being a downtrend in price.
As you might suspect even before examining any evidence, it is far easier, as well as far more effective, to detect the current existence (or nonexistence) of something than to predict its future existence. As for evidence, none of the successful technicians interviewed in Jack Schwager's MARKET WIZARDS books claimed to be a counter-trender, i.e., a predictor of future trends.
So if you have tried diligently to use TA in your trading strategy and failed with it, probably the first thing you should ask yourself is "Was I trying to predict and ride the next trend, or was I trying to detect and ride the current trend?"
Well, there are two types of Technical Analysis: the type that attempts to detect a price trend and the type that attempts to predict a price trend. Yes, it's true: not all TA is about prediction.
Whether you are trying to use TA for prediction or detection depends on whether you see "buy low and sell high" (BLASH) as a plan or a goal. For counter-trenders aka trend faders, BLASH is a plan. Counter-trenders are trying to pick tops and bottoms, i.e., they are trying to predict the next trend, which of necessity opposes the current trend (if there is a current trend). So they are countering (or fading) the current trend. Hence, the name "counter-trenders".
For trenders aka trend followers, BLASH is just one of several possible goals. Others are "buy high and sell higher" and "sell low and buy lower". Trenders attempt to detect the current price trend so they can climb on board and ride it to a profitable future. The plan for trenders is "buy strength and sell weakness", strength being an uptrend in price and weakness being a downtrend in price.
As you might suspect even before examining any evidence, it is far easier, as well as far more effective, to detect the current existence (or nonexistence) of something than to predict its future existence. As for evidence, none of the successful technicians interviewed in Jack Schwager's MARKET WIZARDS books claimed to be a counter-trender, i.e., a predictor of future trends.
So if you have tried diligently to use TA in your trading strategy and failed with it, probably the first thing you should ask yourself is "Was I trying to predict and ride the next trend, or was I trying to detect and ride the current trend?"
