Why does anyone take technical analysis seriously?
- Thread starter Sotnis
- Start date
I just want to say a few words on TA and why it can work but also not work.
1.Everyone sees the same pattern/support resistance lines. This means that stops will be congregated around the same areas. You can use these movements to profit in either direction. Novice traders are usually the ones that loose money from these movements because of bad stop placement. But the patterns you see on the chart are very real and were created "on purpose" by the traders acting as a whole. What they call a self fulling prophecy.
2. TA can also predict areas of expected higher volatility such as breakout and failure moves. TA most often cannot predict the direction of a price but as I said can predict that there will be a bigger than average move upon confirmation or failure of a pattern. You can use this higher than usual volatility for quick profitable scalping.
3. Unless i'm forgetting something, TA is a derivative of price, volume, and time. There is also "Price Action" which I feel sort of falls into the umbrella of TA. Anyway using pretty much the above three, I've personally witnessed many people at my office make consistent profits for years and years, therefore I can pretty much disprove the fact that TA does not work. You may have to arrive to your own conclusions but regardless I've been in the business long enough to see that TA can work and it seems to be better used for shorter term trading.
4. Chart patterns aren't the only form of TA. Maybe the OP needs to expand beyond this as he is probably getting sucked in to what are obvious patterns and falling prey to his emotions.
So bottom line is:
Can you make money without using TA: YES. Can you make money using TA: YES.
Just because it doesn't work for you does not mean it does not work for everybody. So move along if it's not working for you and stick to just fundamentals.
1.Everyone sees the same pattern/support resistance lines. This means that stops will be congregated around the same areas. You can use these movements to profit in either direction. Novice traders are usually the ones that loose money from these movements because of bad stop placement. But the patterns you see on the chart are very real and were created "on purpose" by the traders acting as a whole. What they call a self fulling prophecy.
2. TA can also predict areas of expected higher volatility such as breakout and failure moves. TA most often cannot predict the direction of a price but as I said can predict that there will be a bigger than average move upon confirmation or failure of a pattern. You can use this higher than usual volatility for quick profitable scalping.
3. Unless i'm forgetting something, TA is a derivative of price, volume, and time. There is also "Price Action" which I feel sort of falls into the umbrella of TA. Anyway using pretty much the above three, I've personally witnessed many people at my office make consistent profits for years and years, therefore I can pretty much disprove the fact that TA does not work. You may have to arrive to your own conclusions but regardless I've been in the business long enough to see that TA can work and it seems to be better used for shorter term trading.
4. Chart patterns aren't the only form of TA. Maybe the OP needs to expand beyond this as he is probably getting sucked in to what are obvious patterns and falling prey to his emotions.
So bottom line is:
Can you make money without using TA: YES. Can you make money using TA: YES.
Just because it doesn't work for you does not mean it does not work for everybody. So move along if it's not working for you and stick to just fundamentals.
Interesting. I usually hear it said that if, after 2 years or so, you're not clearly 'on your way' then you need to quit. I find it hard to imagine i'll ever 'see' something new in the charts that i've not noticed over the last half decade, but I live in hope!
I'm currently a student in university doing a quantitative degree. What I've learned is that there are plenty of people who fail to understand mathematics, statistics and other science related subjects. And these are people who can study a clearly defined curriculum with all the world's resources at their hand to help them.
Still, many of them fail.
Does this mean that mathematics and statistics doesn't work?
Eddie, I am not saying that if you continue that you will succeed...who knows. I am saying that it is a tough road and years is more common than months. I train Chinese martial arts and find it similar, there comes a time when the light comes on.
I used TA in the past and made money with it but heres my opinion:
You can make money with TA just like you can with random entries and risk management but if you want to make a killing you have to start anticipating and predicting rather than reacting.
Once I started looking at the drivers of actual price movement I developed a real positive expectancy.
If the price of company goes up 1% 15 days in a row and gaps up 50% on day 16, make all the TA justifications you want but the price movement was probably driven by a takeover, drug trial result, earnings etc not some fairy dust pattern/formation/candle/scribble etc
You can make some money with TA if you are lucky but for the most part it is "hocus pocus"
If you want real success in trading start looking at what moves prices in the short and long term whatever market your in.
You can make money with TA just like you can with random entries and risk management but if you want to make a killing you have to start anticipating and predicting rather than reacting.
Once I started looking at the drivers of actual price movement I developed a real positive expectancy.
If the price of company goes up 1% 15 days in a row and gaps up 50% on day 16, make all the TA justifications you want but the price movement was probably driven by a takeover, drug trial result, earnings etc not some fairy dust pattern/formation/candle/scribble etc
You can make some money with TA if you are lucky but for the most part it is "hocus pocus"
If you want real success in trading start looking at what moves prices in the short and long term whatever market your in.
You mean trading the news, or trading the bids and offers on the orderbook or something?
Not after the fact......
this.
A lot of people expect TA to be some magic that leads them to the golden pot at the end of the rainbow. TA imo is an art/science that you have to keep practicing until you develop an array of toolboxes that are consistent and reliable.
Now Paul Tudor Jones isn't going to give you his secret of how he uses TA and show you the road to $$$...though I wish he did. Nor am I going to share how I use TA since it's been working great for me.
And to answer your question OP, I've been shorting Biotech since March based on charts strictly. The mass hysteria, drug prices, and hedge fund manager attacking the patents are all just coincidences.
TA is simply following the smart money's moves based on the footprints they have left in the sand.
Exactly the same experience for me. First many years of learning, studying and losing money....
The fact that not many succeed means also that it is difficult, so you need time to get there. If you get there....