What's the deal with chart analysis?

Discussion in 'Options' started by wentonchan, Apr 20, 2008.

  1. Howdy everyone,

    Well, I'm brand new to chart analysis and I'm testing out strats and theories @ investopedia...but one thing I can't wrap my head around is chart analysis. How are shapes and figures in charts a reliable way to analyze the potential performance of a stock?

    Much obliged for the help, thanks.
  2. MTE


    Pick up a book or two on technical analysis and see for yourself.
  3. You've got to mix technical analysis with tape reading, market sentiment analysis, economic analysis, a little dose of contrarian analysis, and some basic fundamental knowledge of credit cycles to be able to trade consistently. Using charts alone is 50/50 in my opinion. I use it only as one tool in a toolbox.
  4. Being right 50% of the time and wrong the other 50% of the time is okay as long as you earn a lot more when you are right than what you lose when you are wrong.
  5. MTE


    I agree, if the average risk/reward is 1:2 you can make a lot of money with a 50:50 probability.