Is Technical analysis bullshit ?
Many people don’t recognize technical analysis and says TA is useless before doing any homework to even fully understand what it is or how it should be used.TA is bullshit after like saying no one can make any money in the stock market because some academics did a study and didn’t make any money.
There are as many ways to use technical analysis as there are ways to make money in the stock market. Stock market participants range from day traders to value investors from option traders to futures traders and technical analysis is just as diverse. It is the peak of arrogance for someone to think they can dismiss the entire art and science of technical analysis because they can’t figure out how it works or how to make it work. Many traders spend thousands of hours to construct profitable trading strategies using some form of TA.
The right question is not “Does technical analysis work ? or Is technical analysis BS ? but to first quantify and specify what exactly do you think technical analysis is? What patterns are you testing? What time frame? How are you managing the entries and exits? What is your position sizing? How diversified is your watch list going to be and how many positions will you take? How will you account for volatility?
The real search for profitable trading is creating a positive expectancy model and technical analysis is just a tool for finding it in repeating patterns. Technical analysis is the tree and the trading system is the forest. Many miss the forest for the trees.
Most of the people that dismiss technical analysis have no idea how to even create a technical trading system to back test or forward test much less have enough information to dismiss it as not working at all.
Also they never seem to research the millionaire traders that have proven that it gives them a profitable edge in the markets. It is as if they said you can’t make any money playing cricket because they tried and it didn’t work for them.
Technical analysis is the art and science of using the behaviors seen on a price chart of traders and investors as they interact buying and selling a stock to create good risk/reward ratios for entry signals. Profitable trading using technical analysis is based on quantifying trade entries and exits with a good probability that losses will be small and wins would be big. By placing stop losses at price levels that will prove you wrong and letting winners run until price reverses and tells you the move could be ending. That is the proper use of technical analysis everything else is just commentary.
There are as many ways to use technical analysis as there are ways to make money in the stock market. Stock market participants range from day traders to value investors from option traders to futures traders and technical analysis is just as diverse. It is the peak of arrogance for someone to think they can dismiss the entire art and science of technical analysis because they can’t figure out how it works or how to make it work. Many traders spend thousands of hours to construct profitable trading strategies using some form of TA.
The right question is not “Does technical analysis work ? or Is technical analysis BS ? but to first quantify and specify what exactly do you think technical analysis is? What patterns are you testing? What time frame? How are you managing the entries and exits? What is your position sizing? How diversified is your watch list going to be and how many positions will you take? How will you account for volatility?
The real search for profitable trading is creating a positive expectancy model and technical analysis is just a tool for finding it in repeating patterns. Technical analysis is the tree and the trading system is the forest. Many miss the forest for the trees.
Most of the people that dismiss technical analysis have no idea how to even create a technical trading system to back test or forward test much less have enough information to dismiss it as not working at all.
Also they never seem to research the millionaire traders that have proven that it gives them a profitable edge in the markets. It is as if they said you can’t make any money playing cricket because they tried and it didn’t work for them.
Technical analysis is the art and science of using the behaviors seen on a price chart of traders and investors as they interact buying and selling a stock to create good risk/reward ratios for entry signals. Profitable trading using technical analysis is based on quantifying trade entries and exits with a good probability that losses will be small and wins would be big. By placing stop losses at price levels that will prove you wrong and letting winners run until price reverses and tells you the move could be ending. That is the proper use of technical analysis everything else is just commentary.
Comments
Post a Comment