What Technical Analysis will NOT do for you
Posted by MC on Apr 17, 2008
Technical Analysis or TA for short is a tool used by most traders to some extent. It’s the artistic science of using charts, volume and/or indicators to try and pick trades that will be high probability winners.
Newer traders (myself included) often waste a ton of time early on, learning 20 indicators thinking they’ll gain the answer to profit. I think it’s important to address what TA will NOT do for you. TA is NOT the holy grail and never will be. There will never be an indicator that will eliminate the mental edge required to profit from trading. This is why I think it’s best to read some market psychology books before anything else to get the proper core mindset. The true holy grail is your mind, and the better your psychological conditioning the better you are at controlling money management/position sizing. Risk management and controlling emotion are also traits that proper TA training can help foster and develop in a trader.
Lets dig in a bit further…
TA helps us formulate an educated guess about what’s most likely to happen next based on how the chart depicts supply and demand. Also formations and indicator levels that the majority of people use can help. There is a ton of interpretation which should improve as we become more educated through screen time and experience. The better your mentor and the more time you invest in screen time the faster your learning curve. For many, TA is the easy part of the puzzle and the mental side is what takes more effort and time to overcome. This is because our very upbringing and how society revolves is the opposite of how you profit in the market.
Why do I use the term “guess”? Well what a chart cannot tell us is who’s on the sidelines waiting for a certain trigger to jump into the market and buy or sell short. There are millions if not billions of minds at work in the market determining what fair value means to them. The market is an auction and someone’s thought about perceived value changes on every tick. This makes the market ever changing and what HAS worked is not guaranteed to work going forward. Chop days show a balanced market, other than that the market is making waves to try and find that balance between buyers and sellers.
So in closing, a good rule of thumb in the market is look at why you should NOT take the trade and TA can help out.
Focus on mastering a few select indicators and use them consistently since it’s consistency that will lead you to profit in the markets.
Good trading, hope this helps. Stop in the forums and check all our great content that keeps growing. 
www.tradersbase.com/forum
