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Do you ever feel like you spend too many hours drawing support and resistance, key levels, double tops, triple bottoms, only for price action to not respect your technical analysis? So now you ask yourself, “is technical analysis real or is it nonsense BS?”
In today’s short article, I will go over:
TradingMarkets.com conducted a survey of 1,000 traders and found that 62% believed technical analysis was helpful in making profitable traders. However, only 18% reported consistently profitable results.
Imagine you’re on a treasure hunt. You have a map, but of landmarks, and squiggly lines and mysterious symbols. This is what technical analysis is like in the stock market. Is all of this a crystal ball or is smoke signals?
The truth is that technical analysis is a helpful tool to help you:
People that claim technical analysis is BS or useless are those that have done very little research, and didn’t find success with it.
And those who’ve found success using technical analysis are those who have spend thousands of hours coming up with a trading strategy that works.
One con of technical analysis is that it’s not always accurate. The future is unpredictable, and the stock market is no exception. Even the best technical analysis can’t guarantee success.
Investopedia also conducted a study analyzing the performance of various technical indicators. They found that some indicators could predict future price movements with up to 70% accuracy in specific market conditions.
Yes, technical analysis works. The best technical analysis covers the following:
With all of these topics, the next step is to backtest the system, looking back as far as possible to see how your system holds up in different market environments.
To make technical analysis work for you, is to find a technical analysis framework that results positive results. You don’t have to be right every time, you just need to be right enough times to be a profitable trader.
There are thousands of retail traders who’ve succeeded by using technical analysis. Here are a few that have done well with purely technical analysis: