I have been trading markets strictly using Technical Analysis for 3 years now. Well I am big fan of Technical Analysis, the charts specially candlestick charts. I like to keep it simple while using charts, tools, indicators, oscillators, moving averages. More about this later. What I want to discuss now is - Is Technical Analysis worth spending time? Many traders / People ask me a question- 'Does it work?'
Well, unfortunately, the answer is not straight forward.
Many of us look at the chart patterns, candlestick patterns, moving average crossovers etc as a money making formula. This is where most traders make mistake.
Why cant one use charts as supportive tool in deciding the trade.
For me Technical Charts are like GPS system. It shows you the path when you are lost or your are not finding the right direction towards your destination.
Charts helps understand overall location of Current Price in Price journey of a stock. It also help us judge probable future direction of the stock price. Is this direction guaranteed?
No. Its just that the probability of price moving in probable direction is higher.
Frankly no one becomes good or bad trader by using Technical Analysis. Its just a tool to help us 'Better' the trade or say 'Increase' the probability of winning trades.
Its not about how you do your analysis. Its about how is Risk Management, Money Management and Discipline. More on this later.
In fact Technical Analysis or for that matter 'Any Analysis' just 30%-40% role in your trade. It all about how much money you want to make and how much money you are willing to risk for making that much money. So Risk Management, Money Management and Discipline play 60-70% role in making or breaking your trade.
There is no point solely cursing Technical Analysis for a wrong trade or there no point even giving all the credit to charts for giving you a winning trade.
I differ with those who rely only on charts and are not willing to consider all other aspects of a trade.
Don't get me wrong here I too use the charts but equally focus on other aspects too. So if a Technical Chart gives me 30% edge over other traders, why shouldn't I be using the charts?
Hope I am able to express myself.
Do you know a great trader who ignore aspects like risk management, money management and still make good bucks trading with his whims and fancies?
Well, unfortunately, the answer is not straight forward.
Many of us look at the chart patterns, candlestick patterns, moving average crossovers etc as a money making formula. This is where most traders make mistake.
Why cant one use charts as supportive tool in deciding the trade.
For me Technical Charts are like GPS system. It shows you the path when you are lost or your are not finding the right direction towards your destination.
Charts helps understand overall location of Current Price in Price journey of a stock. It also help us judge probable future direction of the stock price. Is this direction guaranteed?
No. Its just that the probability of price moving in probable direction is higher.
Frankly no one becomes good or bad trader by using Technical Analysis. Its just a tool to help us 'Better' the trade or say 'Increase' the probability of winning trades.
Its not about how you do your analysis. Its about how is Risk Management, Money Management and Discipline. More on this later.
In fact Technical Analysis or for that matter 'Any Analysis' just 30%-40% role in your trade. It all about how much money you want to make and how much money you are willing to risk for making that much money. So Risk Management, Money Management and Discipline play 60-70% role in making or breaking your trade.
There is no point solely cursing Technical Analysis for a wrong trade or there no point even giving all the credit to charts for giving you a winning trade.
I differ with those who rely only on charts and are not willing to consider all other aspects of a trade.
Don't get me wrong here I too use the charts but equally focus on other aspects too. So if a Technical Chart gives me 30% edge over other traders, why shouldn't I be using the charts?
Hope I am able to express myself.
Do you know a great trader who ignore aspects like risk management, money management and still make good bucks trading with his whims and fancies?
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