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Technical Analysis, What it is and What it is Not

Started by Zach Bass · 10 months ago

The first misconception that must be cleared up is that Technical Analysis (TA) is not technical, it’s completely subjective. More of an art or craft. And therefore, the effectiveness and quality of result depends upon the skill of the person practicing that craft.
Secondly, ... Continue reading »

4 comments

  • kylelong100

    11 months ago

    Dear zach,

    could you summarize how the philosophy in art of war applies to exploiting the seams. the outlines of the book appears hard to understand and has a lot of military formations that I do not want to read as of this time.

    thanks
    reply
  • IC11

    11 months ago

    The main point of Sun Tzu is that the outcome of conflict is determined by foreknowledge of enemy AND ally, acted upon with preparation, speed, surprise and timing. He essentially postulates that the battle is won or lost before the troops are ever deployed because the commanders know what they know and will act accordingly.

    TA is a supplement to doing solid research and due diligence as an investor. Solid research will tell you whether a company is making money, whether it's expanding it's business, and whether it controls intellectual, real or physical assets that you think are a money maker. All of these are most important but they can't tell you for sure whether a stock is going up or down from today's closing price. Perception sets the price on a daily basis. Fundamentals set the the trend over time. Fundamentals are the meat and potatoes that will deliver over the long term.

    After doing solid research, TA may point to entry and exit points that will maximize profits and minimize losses to a degree. TA may get you an edge when everyone else knows everything about the stock worth knowing. A trader is successful if 1 or 2 great trades will provide a 10% return behind 6 flat or loss trades. Someone that makes great trades half the time is a "phenomenon".
    Also, audacity, (guts, decisiveness) are important in conflict/competition. Having the edge of knowing what you want to do after you predicted certain herd behavior minimizes hesitation and gives an extra amount of confidence to stick with a plan and let it prosper.

    TA is the prediction of fear and greed within the herd based on accumulated observations.
    reply
  • Thom

    11 months ago

    To me TA is like Counting Cards in Vegas. It doesn't guarantee you a winning hand but it greatly increases the odds. I don't believe in one single method to trade, Gann, Fibonacci Waves, Oscillators, FA, TA; they are part of a wise trader's arsenal.
    reply
  • lindseylohanscoinslot

    11 months ago

    Good post, Ern. Your lead is great -- "analysis" is always subjective. An esteemed mentor told me, "Torture them long enough, and numbers will tell you anything you want them to."
    reply

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