Technical analysis is a very useful trading tool.
Technical analysis helps to determine what actions buyers have resorted to in certain situations in the past. It is not difficult to assume that, once in the future in such situations, they will do the same as in the past. When they do exactly as you expect, you can, with this information, trade profitably for yourself.
If they act contrary to your expectations, then you may have to stop your operations. But even in this case, you will get a lot of valuable information for yourself. It is hoped that the price you paid for this knowledge will not be too high, but be that as it may, you will know more than before. You know that the latest wave of purchases has exhausted potential demand and, therefore, you need to start looking for further evidence of the beginning of the reverse process.
To recognize that technical analysis is a very useful tool for trading, you do not necessarily have to believe that it is an effective forecasting tool.
Several arguments against technical analysis are indeed not without grounds, however, there are many arguments that do not stand up to any criticism. For example, some people unreasonably claim that there are no technicians in the world who would demonstrate steady progress over a fairly long period of time, and that none of the technicians have achieved successes comparable to those of such market geniuses like Warren Buffet, Benjamin Graham or Peter Lynch
In support of their arguments, they will point you to one or another unlucky technician who, in the blink of an eye, profukal his portfolio. In a few years they will point you to some other famous technician who has performed a stupid operation, and then one more. Therefore, technical analysis is a completely useless undertaking.
However, any of your attempts to counter these arguments with a whole list of well-known experts in fundamental analysis, who have profoundly portfolio their clients with no less brilliance, will be ignored.Just as an endless listing of catastrophic failures could not disprove the undoubted benefit of fundamental analysis, so the list of loud successes of specialists in fundamental analysis does not prove that a fundamental analysis is the only way to earn money on buying / selling shares. And in any case, this cannot serve as evidence of the futility of technical analysis.
In fact, we could name many technicians who demonstrate steady progress over the years. While most of them are in obscurity, not particularly advertising their achievements, there are those who bathe in the rays of glory. For example, John W. Henry, the owner of Boton Red ox, made a considerable fortune by acting as a technician who tracks trends in the stock market. Other examples of outstanding successes are Ed Seikota, a trader with 35 years of experience and one of the first "masters of the market," and Bill Dunn. We have cited here just a few examples from a variety of successful independent traders and fund managers who use technical analysis tools to make decisions related to buying / selling stocks.
Another argument regarding the problem of interpreting price charts is to propose to solve the following problem, which no technician has yet tried to solve: the technical analyst gets half of the price chart from which all identifying information is removed. Based on the information at his disposal, the technician should answer the question whether the stock price was higher or lower at any point in the second half of the chart.
Of course, no one even claims a prize for solving such a problem, and this, according to opponents of technical analysis, is proof that none of the technicians is sure of the effectiveness of technical analysis to such an extent as to at least try to solve this problem. Qualified technicians are able to predict the future no better than the Haruspex or the fortune teller on the tarot cards. Technical analysis is not a tool for predicting fate. This is just a tool for trading on the stock exchange.
Date: 11.10.2018, 23:50 / Views: 61554
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