Technical analysis is a crutch

Discussion in 'Psychology' started by afto, May 16, 2011.

  1. afto


    No, I didn't say it was cr*p. and no, I didn't say it doesn't work.
    It's merely a crutch which is a helpful - at times indispensable - support in the right hands.
    TA is a visual representation of what the market is doing. Green bars indicate upward movement and red bars indicate downward movement.
    Many who trade successfully and unsuccessfully with TA talk about price bouncing off support lines, respecting certain moving averages, tagging previous resistance, retracing to magical Fibonacci lines. They talk in hushed tones about Gann angles, Market profile, price action, important pivots, time cycles et al. They write books and sell courses about the secret geometry of the markets because everyone needs reasons.
    And the market laughs. It neither rises nor falls because of any of these reasons just like rain doesn't fall because of dark clouds.
    Dark clouds certainly signify rain. They are a good indicator and a prudent person would probably grab an umbrella. However rain has never fallen because of dark clouds. Never in a billion years. Rain just falls.
    The market does what it does. We can tell stories and paint pictures about it and that is fine. We can make and lose money based on those stories and that is also fine but have you ever wondered what would happen if you threw away the crutch?
    Is that the trader's nightmare or his greatest aspiration?
  2. NoDoji


    Totally spot on!

    I was talking with a couple trading friends this afternoon and I said, "These lines I draw are training wheels. They're nothing but training wheels! But I don't care because they work again and again and again."

    Ever since I got crutches, I'm making money hand over fist. Maybe the market feels sorry for me hobbling around on crutches all day :D
  3. BSAM


    We're bleeding for you NoDoji.
  4. dejavu8


    trading with good crutches is way easier than with nothing but only naked candle chart. when trading with well-designed and high precision auxiliary tool set, achieving least risk and sustainable profit is just a piece of cake.
  5. cornix


    Market does not act the same way rain does... Market is people watching all those "S/R levels" etc... So certainty, at least sometimes, TA is the cause for market move, not the other way around.
  6. piezoe


    Just one question. Have you ever known it to rain without a cloud being present?
  7. afto


    No, I have never known it to rain without clouds being present.
    However, I have known it not to rain when clouds are present - and that is my point.

  8. piezoe


    So could we say that when clouds are present the probability of rain is higher then when clouds are not present? And could we go further to say that when low dark clouds are present the probability of rain is higher then when fluffy, high white clouds are present? And could we go further still to say that when low dark clouds are present and thunder is heard, the probability of rain is higher still?

    So even though it doesn't always rain on us when dark low clouds are present and we hear thunder, nevertheless, under those circumstances, it rains, or at least sprinkles, more often than not. That is technical analysis without any contribution from self-fulling prophecy, unless you are a Shaman of course. And indeed, there may be some aspect of self-fulfilling prophecy in technical analysis if enough traders are seeing the same thing at the same time. And if so, that is a good thing, as that will make our technical analysis work even better so long as there is a sufficient number of inept traders to take the other side of our trades.