8 MYTHS ABOUT TECHNICAL ANALYSIS
There are many people and many opinions in the market.
There are those who criticize technical analysis, calling it superficial and even useless.
There are those who consider technical analysis (TA) the holy grail that can bring huge profits.
Today we will try to debunk 8 myths about technical analysis.
myths
1. TA is for short-term trading or day trading only.
Many people think that TA is only suitable for short-term and computer-driven trading, such as day trading and high frequency trades.
The history of TA actually goes back long before computers were invented, and many famous and profitable traders use it for long-term trading.
Technical analysis is used by traders on all timeframes, from minutes to weeks and months.
2. Only individual traders use technical analysis.
In fact, investment banks have dedicated trading teams that use technical analysis.
High-frequency trading, which covers a significant portion of the trading volume of stock exchanges, relies heavily on technical concepts.
3. TA has a low success rate.
To debunk this myth, all you have to do is read Masters of the Market: Interviews with Top Traders by Jack D. Schwager, which quotes many traders who profit solely from technical analysis.
Traders with many years of experience have been making profits using technical analysis for more than a century.
4. Technical analysis is fast and easy.
Novice traders open trades based on a simple TA, but this is not enough to be profitable at a distance.
Success depends on continued study, practice, good money management and discipline.
Technical analysis is just a tool, just one piece of the puzzle.
5. Ready-made technical analysis software can help traders make money easily.
There are a lot of advertisements on the Internet that promise to give you a program for a small amount that will do everything for you and bring you profit - in fact, this is a scam.
There are programs and indicators that can help you trade, but no program will give you guaranteed profits.
6. Technical indicators can be applied to all markets.
Most often, yes, TA can be applied in all markets, but there are exceptions.
Different asset classes move in their own way, with their own characteristics, and a trader must be able to adjust his TA for a particular asset.
Don't make the mistake of applying technical indicators designed for one asset class to another.
7. Technical analysis can give very accurate price predictions.
Beginning traders expect to see 100% accurate signals and accurate profit prices, reversals and so on from TA.
This is simply impossible.
Most often, TA helps to find the zone where the price can go, where it can reverse from and this is not a specific point, this is a zone and experienced traders understand this.
8. The winning percentage in technical analysis should be higher.
If the first trader out of 5 made 4 profitable trades, and the second trader out of 5 made 1, who is more successful?
You need to get more information to give an answer, it may be that the first trader earned $ 10 in 4 trades, but at the same time he lost $ 80 in one and then he will be in the red, and the second trader lost $ 40 in 4 trades , while in one transaction he earned $ 100.
The right trading structure ensures profitability even with a small number of winners.
It is not necessary to have many profitable trades, it is enough that the profit covers losses and something else remains, and sometimes one trade is enough for this.
essence
Technical analysis is not the holy grail, it will not give you 100% profit.
It does not suit everyone and you need to study it before you understand whether it suits you or not.
You need to gain enough experience to learn how to use technical analysis correctly.
When used correctly, TA can give you a real opportunity for trading success.
Good luck!
There are those who criticize technical analysis, calling it superficial and even useless.
There are those who consider technical analysis (TA) the holy grail that can bring huge profits.
Today we will try to debunk 8 myths about technical analysis.
myths
1. TA is for short-term trading or day trading only.
Many people think that TA is only suitable for short-term and computer-driven trading, such as day trading and high frequency trades.
The history of TA actually goes back long before computers were invented, and many famous and profitable traders use it for long-term trading.
Technical analysis is used by traders on all timeframes, from minutes to weeks and months.
2. Only individual traders use technical analysis.
In fact, investment banks have dedicated trading teams that use technical analysis.
High-frequency trading, which covers a significant portion of the trading volume of stock exchanges, relies heavily on technical concepts.
3. TA has a low success rate.
To debunk this myth, all you have to do is read Masters of the Market: Interviews with Top Traders by Jack D. Schwager, which quotes many traders who profit solely from technical analysis.
Traders with many years of experience have been making profits using technical analysis for more than a century.
4. Technical analysis is fast and easy.
Novice traders open trades based on a simple TA, but this is not enough to be profitable at a distance.
Success depends on continued study, practice, good money management and discipline.
Technical analysis is just a tool, just one piece of the puzzle.
5. Ready-made technical analysis software can help traders make money easily.
There are a lot of advertisements on the Internet that promise to give you a program for a small amount that will do everything for you and bring you profit - in fact, this is a scam.
There are programs and indicators that can help you trade, but no program will give you guaranteed profits.
6. Technical indicators can be applied to all markets.
Most often, yes, TA can be applied in all markets, but there are exceptions.
Different asset classes move in their own way, with their own characteristics, and a trader must be able to adjust his TA for a particular asset.
Don't make the mistake of applying technical indicators designed for one asset class to another.
7. Technical analysis can give very accurate price predictions.
Beginning traders expect to see 100% accurate signals and accurate profit prices, reversals and so on from TA.
This is simply impossible.
Most often, TA helps to find the zone where the price can go, where it can reverse from and this is not a specific point, this is a zone and experienced traders understand this.
8. The winning percentage in technical analysis should be higher.
If the first trader out of 5 made 4 profitable trades, and the second trader out of 5 made 1, who is more successful?
You need to get more information to give an answer, it may be that the first trader earned $ 10 in 4 trades, but at the same time he lost $ 80 in one and then he will be in the red, and the second trader lost $ 40 in 4 trades , while in one transaction he earned $ 100.
The right trading structure ensures profitability even with a small number of winners.
It is not necessary to have many profitable trades, it is enough that the profit covers losses and something else remains, and sometimes one trade is enough for this.
essence
Technical analysis is not the holy grail, it will not give you 100% profit.
It does not suit everyone and you need to study it before you understand whether it suits you or not.
You need to gain enough experience to learn how to use technical analysis correctly.
When used correctly, TA can give you a real opportunity for trading success.
Good luck!
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