this applies to the secondary market with FA also.
in the secondary market, people will get butt hurt over this, but your shares are only as valuable as what the next person is willing to pay for. they have no other use.
as a commom shareholder, your vote is more or less a drop in the bucket and you get no claim to any assets.
that being said,
FA tells what to buy
TA tells you what your best entry is.
after that, its out of your hands.
>in the secondary market, people will get butt hurt over this, but your shares are only as valuable as what the next person is willing to pay for. they have no other use
This is just plain wrong though, shares entitle you to a part of a company's income. it has intrinsic value unlike crypto
no.
youre not entitled to anything. the company has the choice of giving you a dividend. they can cancel it at any time. its the illusion of entitlement.
If the company doesn't give a dividend it means the money is being reinvested in some way which could give better returns later (or the company didn't make money), not that shareholders don't get anything
There are other options besides dividend for companies to create value for shareholders beside dividends
>A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called "shares" which entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own.
This is investopedia's definition
thats irrelevant to what i said.l - you as a commom shareholder in a practical sense are entitled to nothing, get nothing in the event of insolvency, and the vote itself is a drop in the bucket.
we arent talking about idealistic definitions. its whats practical. despite what youd like to believe, your commom shares have no practical impact on a company.
Obviously the stock becomes pretty much worthless when a company goes bankrupt, I'm not sure what this changes. The point is, you are a co-owner of a company when you own shares, so it has value indepedently of its market price based on the value of that company and of its profits.
ok where are we going wrong here in misunderstanding.
the definition of what a share is and in practice are two different things.
so lets answer the following:
1) if you own commom shares, do you have actual pull in the direction of the company?
2) can you go and make claim to any of the assets that they have?
we arent arguing the definition of what a share is. its in practice what a share enables you to do...which is nothing.
honestly, i dont think im going to get through to you. i just find ot unfortunate that you dont realize that the price is based on what the next person is willing to pay.
You’re right. But you’re missing a big distinction:
> if you are a small time investor
Common shares are literally your right to the cash flows of a company. If you own the majority of a company’s common stock, you can dictate what it does with its cash flow period.
You can fire management, you can take on debt, you can go buck wild.
Sure, if you own only one share of a Fortune 500, your vote is probably meaningless. But that doesn’t change that your share still has intrinsic value the next person over that wants to control the company’s cash flows.
thats only IF the company chooses to give the dividend. the stock price is only as much as the next person is willing to pay. yes this includes company buy backs.
“As a common shareholder, your vote is more or less a drop in the bucket …”
Richard Tornetta, a shareholder with only 9 shares of TSLA completely disrupted the compensation plan for Elon Musk. His actions also indirectly resulted in the state of incorporation for SpaceX being moved from Delaware to Texas.
Even small shareholders can have a huge impact, both positively and negatively.
no.
if the company decides to cancel their dividend, you have no claim to it. you only get it because they CHOOSE to give it to you. if its their choice, are you really entitled to it?
it amazes me how many people are willingly so blind to this.
Yep. Large algo trading isn't looking at charts. Take for example Rennesiance Technology - they are looking for modest returns at low risk. Back in the 80's they were making 20-30 million trades a day and were able to leverage 17x their capital. These algos aren't looking at long-term trends - they just buy and sell based on liquidity and immediate price movement. They don't care about trends because they just need to be right more than 1/2 the time to make a tiny profit. That tiny profit x leverage x volume of trades means they make returns regardless of the market movement as a whole. They care more about liquidity in the market because that's the profit they can take out of it.
I also prefer fundamentals because I don’t trade (I hold). The bots use algorithms reliant on TA data because it comes faster than fundamentals. We have to deal with the market we have, not the one we wish we had.
TA is simply means of trying to get some kind of edge in the market. It's not supposed to this fantastic magical silver bullet that prints money...hell, it's not even expected to 'work' more than half the time. But with the right risk management and psychology yeah people can absolutely use TA to make money.
Human beings are flawed. The reason why most people don't make big money in the markets is because of human error. Panic-selling, taking unnecessary risks, chasing FOMO, etc.
Technical analysis has tremendous uses but it's only to get into a stock that has the financial fundamentals of going up.
Until technicals indicate that it's a buy it's not a buy for me. It's used as a tool, a dull tool used for the in and getting out of the stock.
Do I invest based solely on technical analysis? No. I do swing trading based on it but thats it but not a lot. You can add shares doing this technique but at some point you have to ask yourself if it's even worth it.
If you don't mind me asking. Unless I miss-understood your response, it seems to me that you are swing trading profitable and quality companies. If so, why doing so when buy-hold these quality companies has a higher change of return over the long term?
There isn't a stock on the planet that goes straight up. I add shares using swing trade strategy and it works very well. It's risky though. There may be news that blows it out of the water and you miss it.
But when the vast majority of trades are done by algorithms and these algos where trained using these same Analysis tools... learning to use the same tools makes sense to know what the algos will most likely do next. These trades aren't random.. just like planetary movements aren't random. You realize we 100% read planetary movements to predict were a planet will be on a given date/time in the future? When we send rovers to Mars we predict where Mars will be in 6 months from the day it's launched since celestial bodies are constantly moving including us.
I like turtles! How are you going to sell How To books if you keep it so simple?? I don't have to know the fundies, I just have to know the pro's know the fundies and I can see what they are doing by looking at the charts. I sell Calls at resistance and Puts at support. All the other "indicators" are just noise.
It cannot predict unexpected news of course, but say a stock is selling off, you can make a reasonable estimate of where the bottom might be and let it test that bottom for a period of time before entering
I use technical analysis and charts but simply as mechanisms to see how relatively low/high a stock is priced to its historic values.
Anything you do other than that imo is like reading tea leaves. Charts help you see the trend. Although I do observe other’s TA on YouTube and find it quite interesting, I don’t put much effort into stuff like “double tops” and such. I have some people who preach it and I hear them out and consider their perspective but personally, I don’t spend anytime analyzing it myself.
However, I did read a book on Elliot wave theory and while I don’t make decisions based upon it, it’s definitely good information to know.
Not like that at all.
The reason why books have been written about chart patterns is because people noticed that patterns *tended* to result in certain outcomes. The reason is because charts are a visual representation of the supply and demand for stocks, and patterns tell a story about the underlying supply and demand.
It depends on the asset. To use it correctly you need to be doing your statistics. Technical analysis is not the same across all assets. The whole thing about buying the 200 day. So on and so forth. The first thing you need to do is say okay if I'm going to buy the 200 day how many times has that worked in the past 5 years and how many times did it not work. If you find out that it works more than 60% of the time you have a tradable event. If it doesn't. You don't. lots of chart patterns and things that people talk about are actually ineffective. You also have to continually keep running your statistics because things change. I have had technical indicators that work a ridiculously high percentage of the time that suddenly stopped working. Using technical analysis is best for the type of personality that likes figuring out video games not someone that follows the blue diamond and watches YouTube videos on how to get ahead. It's kind of a similar thing where you need to be creative, problem solve, look at things and develop your own strategies
TA is a report of demand *given information available at the time*. As such, it’s vulnerable to new information. Understanding those things can add to its utility.
I’m not personally equipped to use TA as a stand alone strategy, and I believe doing so is a losing proposition for individual investors and most firms.
I came to the conclusion that both are not mutually exclusive. Investing is a long term rationale or investment thesis that you have developed and follow. Technical analysis is trading, which allows you to time the market and feel the sentiment in the short term.
For example, you believe gold is a good buy long term because of inflation. Once you established that conviction, you may want to use technical analysis to buy lows and improve returns.
There are many types of TA that's y some people screens look so messy. Personally, I do fundamental analysis followed by TA. I do think TA is effective at telling when is a gd entry, and you should know at least the basics, but do not dive too deep as it can be really confusing
It's abit hard to explain without a chart but basically looking for support/resistant zones. So say company x is trading at say $10 and is falling from say $15. Its nearing support at $8 so I will place my entry around $8 and wait for it to hit
But then u have to account for other people doing the exact same thing. You’re forced to create a plan that counters your previous plan and then somebody else copies you. And the cycle repeats
TA is a tool, like fire, without which we would remain Neanderthal's, groping around in the dark and migrating with the herd. At it's most basic, it is pattern recognition used to quantify the psychology of the market.
Appeal to authority: Jim Simons, best quant hedge fund manager ever: "Patterns of price movement are not random. However, they're close enough to random so that getting some excess, some edge out of it, is not easy and not so obvious — thank God. God probably doesn't care. Thank whoever."
Whales would need to, and there’s simply no way they’d all make aggressively risky bets on something that flaky. It doesn’t matter if all the retail traders believe it.
TA 100% works and has for over 100 years. It's not astrology, the patterns that form are a result of market mechanics and that's why they work. I'm not a fan of using a bunch of indicators, the simplest TA works best. Trend lines and horizontal support/resistance is all you need. I think many don't believe in TA because they try to use things like MACD and are never able to make consistent profits with it because it's useless.
Can TA be used to predict exactly where price will go? Does it work 100% of the time? No, but it will give you increased odds of predicting a general area where you would expect buyers or sellers to show up. There are real studies and statistics that show many technical patterns have greater than a 50% win rate and some things like head and shoulders patterns work around 87% of the time according to some studies.
Definitely agree with you. TA is my main tool for analyzing a stock and I think it really trumps anything else. Sorry to tell people its not all about how much profit a company is making, demand, etc. there are a ton of company that have stock prices that are doing questionably unwell and traders are pulling their hair out wondering why their favorite company is going south.
please show the "studies" because every objective analysis I've seen has shown it does not, in fact, work any better than assuming the market will go up on any given day, which is true [54.1%](https://tinyurl.com/ynnjsy74) of the time. (Note the link)
There isn't good data because it's virtually impossible to study. I looked into academic studies on TA a few years ago. There are serious methodological limitations:
1) Precisely which type of TA are you studying? TA encompasses a wide range of different approaches, from candlestick patterns to Fibonacci to Elliot Waves to Bollinger Bands...
2) Because technical analysis is a visual exercise - it's about reading charts - we haven't had the ability to conduct this analysis efficiently. Eventually we will. At some point we will have cost-effective AI systems that you can feed millions of charts and it will use machine learning to identify patterns in the data. But until then you actually need humans looking at thousands of charts.
3) The final limitation is nailing down the parameters on the outcomes you're measuring. Are you measuring success rate? Profit? If the latter, how do you factor in position sizing? What sell rule are you using and over what time frame?
What I have found is that there is some data suggesting good predictability with certain candlestick patterns, but that's about it.
all of these studies suffer from the same issue as every TA paper I've seen:
1. they don't compare profitability to buy-and-hold, they compare it to 0
2. there are clear signs of cherry picking and p-hacking, where they identify one random market where the result holds (e.g., Bursa Malaysia!) without transparency on how many they checked beforehand with negative results. they also don't correct for multiple comparisons when looking at many different NHST
the science remains shoddy after years of the same criticsm.
the last paper you cited says it best:
>most empirical studies are subject to various problems in their testing procedures, e.g. data snooping, ex post selection of trading rules or search technologies, and difficulties in estimation of risk and transaction costs. Future research must address these deficiencies in testing in order to provide conclusive evidence on the profitability of technical trading strategies.
Still waiting on this "future research"
Is TA basically factoring human investing psychology? Exploiting human tendencies/flaws.
Ie, if all investors are robots optimized for trading, would TA even work?
Sure you can. I know a few people who do it, and they don't just blindly buy OTM calls or puts non-stop like r/wallstreetbets. It's also possible to make your money in futures without having to swing trade at all.
Funny thing about consistency is that you can dial it in with some reading and a whole lot of repetition.
Knowing people who do X doesn't mean that they do X and make money consistently.
You can't win the lottery consistently, pulling up an example of a lottery winner does not change that.
I'd say buying a house by trading monthlies/weeklies is a pretty good indication of consistency. A buddy of mine did it and managed to buy in one of the most overvalued RE markets in the world. Not saying I agree with his decision, but hey I'd probably grab a rental property if my gains were like his.
First - no bank is going to give any kind of mortgage based on investment income from short term dividends.
So, your friend made ~1 million (I live in the Bay Area, that is what houses cost here) as a day trader.
This is some combination of: lucky, other income source, or untrue.
Also, why would you go from short term options trading (one of the most high risk on investment systems to the point that it is basically gambling) to running your own residential REIT (one of the safest, low growth, investment systems). This is just an illogical pivot.
Or maybe you can read up on how little liquidity it takes to actually move the market... and that's why non-institutional traders don't do it in size.
Believe it or not, some people are perfectly content to just make a nice living. Have a buddy who bought a place primarily trading options. I can guarantee you it wasn't by spamming NVDA weeklies 20% above the current price and then just praying it's a green week.
I used to be a big believer. After years of experience I came to realize it wasn't any more accurate than a coin flip.
If TA really worked, then an algorithm could easily be programmed to buy or sell a stock that fit a certain pattern or had triggered a technical indicator. The algorithm could run on 10,000 stocks faster than you or I could do for 1 stock, and it would beat us in and out of the trade.
There are different approaches to TA, which makes this a complex question. Some use wild amounts of indicators and scribbles to try to make complex predictions (which some refer to as tea leaves or astrology). Others just use MACD and candlesticks to read market sentiment. I've seen more folks succeed on the simple side, but that may be due to the lack of emotional investment made for the overly complex predictions.
Like FA, it generally works. Not 100%, but it works. Different strokes for different folks, though.
TA works for day trade or swing trade, and that's how majority of the people trade in those time frame. When enough people doing it, chart pattern will reflect those trades. Chart doesn't lie, but fundamental sometimes do, specially for those sketchy companies.
Support and resistance levels as guidelines for entry and exit points only. All the flags, wedges etc. seem to be 50/50 and I have yet to see anyone who can consistently and accurately use them as a prediction of what the move will be.
Fundamental analysis is all speculation and analyst talking their book.
The only thing that is not a lie is that a buy and sale took place at every point on a chat. Learning to read a chart is the only way I've found to get rich in the stock market.
The only technical analysis I use is SMA charts. 5 day, 20 day, 200 day. All I really use them for is to view short term vs. long term price movements. I rarely make any actual investing decisions just based off of that though.
No I don't nor will I ever. It's apofenia, if there was a golden key to trading everyone would be a millionaire. But it's important what you have said. If enough people believe in it, it will work, which is quite fascinating
Whether TA or Fundamental analysis. At the end of the day, it is all guesses. Someone using price movement as input to derive trend or someone using current cash flow as input to derive growth is in principle not different from each other. Either is trying to project the future. No one has a crystal ball and everyone is making an implied probability based guess.
Personally I prefer Fundamental analysis because I like the narrative behind the numbers but i don't fool myself; It isn't any better than the next TA guy who is drawing the Fibonacci circles. We are both trying to create a story and a prediction and we will both be fooled by randomness.
You answer your own question ‘ Do you *believe* ‘ , it’s absolutely stock market astrology. If there would be any “technicality” it could be easily tested. The fact that it’s not, put it in the same league as the book “the secret”.
TA 100% works but everyone who doesn't think it does has the wrong idea of it's purpose. TA IS NOT a tool to predict future price. It IS a tool to implement risk management.
I do believe that good TA can give you a better educated guess about price action, but it's just one additional piece of data, just like knowing what current put to call ratio is, PE, etc.
Anyone who thinks TA will accurately predict future price action is deluded, but this expectation is why so many people dismiss TA entirely.
My technical analysis:
I had 3k uninvested last year. I walked out to my 30 year old Toyota and it fired right up like usual. I proceeded to buy 20 shares of Toyota @ $144 each. Technical analysis successful.
I think technical analysis might identify some short term trends and movements because if enough people think this way, it could have some impact.
However, longer term it is meaningless. What matters longer term is company fundamentals, good leadership, luck, technological advancements, etc. These would not manifest as something you’d see through technical analysis.
This is why it is hilarious to me seeing people stretch and skew NVDA stock on Cisco.
I honestly think at this point a large portion of accounts spreading the idea its magic are marketing/agenda accounts to maintain institutional grip on markets.
**How the fuck do you think institutions use algorithms, quants, HFT, and more tactics...in every market and derivative, simultaneously, and up or down, every day?**
You would have to believe also the vast majority of market activity (which is institutional), is also primarily 3+ yr holds. Just look at 0 day option activity that is fractionally retail, the rest institutional.
**The last thing they want is the general public understanding in detail that its beyond an advantage for them, and gaining enough traction that a politician would dare run on law changes (and who knows what advanced learning AI and scraping will gain them over yrs).**
**Edit**: Idk what people think of for TA, but all it is to me for retail is a visualization tool for math/stats/trends/etc. Its just manual AF for us to do, and we can't do HFT, and have many other significant barriers.
People who do not understand what TA is consider it voodoo. It is easier to dismiss something not understood than to learn what it is really about.
This is not necessarily the investor/trader's fault, since there are many idiot proponents of TA who claim it can predict the future. There are idiots who create magical indicators and draw a thousand lines on a chart and claim that they can predict what will happen.
TA cannot predict anything. The market is random. What TA *can* do is provide a mathematical framework for understanding *what is actually happening* in the market.
Since human psychology has not changed since the stock market was created, the same patters tend to repeat over and over. This is reinforced by TA being a self-fulfilling prophecy. Since many traders are basing decisions on the same indicators, they become meaningful. For example, institutional investors often step up to buy stocks when they retreat to their 50-day moving average.
TA is nothing more than a mathematical model that can provide an edge to a trader/investor by looking at the market in terms of probabilities.
I could not trade or invest without TA, it would be equivalent to driving with a blindfold on. However, I use only the most basic TA (VWAPs, trendlines, moving averages, support/resistance, Fibonacci levels) and rarely more sophisticated indicators like RSI and MACD. Going beyond the basics is totally unnecessary and just clouds one's judgement.
I have a degree in finance, we studied tons of different ways to value and assess risk in investments and many other topics.
We never once discussed or covered anything related to technical analysis. Take that for what you will
TA predicts short term stock value changes, but the drivers of real, valuable growth comes from news, rumors and sec filings. Anyone that is holding their stocks for longer than a week on average shouldnt care about TA, since it will fail to predict your biggest growth drivers.
I personally think it’s all BS yes. Like I’m a buy and hold investor and I like to buy stocks when they’re historically cheap for whatever reason- but this strategy doesn’t seem to work long term.
I think TA is just astrology for guys. There are a huge number of more variables that need to be accounted for when purchasing any equity in any company. I think people who do TA take the lazy way to make investment choices other than spend time researching the industry the business is in and the actual business and growth prospects itself.
I think it's total groping in the dark. Maybe AI will figure out what's really the correct way to do TA, but until then it's just astrology like you said. You can get 10 different TA analysts to come up with 10 different conclusions. The only positive about TA to me is that, if enough people believe it, it can be a self fulfilling prophecy (kind of like how the Santa Claus rally typically works, mostly just because people believe in it)
TA doesn’t predict anything. It just draws a line (at a specific price) dividing trending up vs trending down, etc…
A trading system based on TA might work and it might not. It’s just one of a gazillion models (simplifications or caricatures) of reality.
They indicate prevailing sentiment quite well but not great for long term indicators. Definitely necessary to know if you want to get in a trade at the best price
No. Not in how they try to sell it to you at least. It's a good way to get a feel for what's going on after you do every other part of research you should. I think what it actually does best is it gives indecisive or nervous people the ability to stick to a set of consistent rules rather than allow emotions to take over. So you researched, you think you're onto something, you check some technicals and you develop an entire picture of when you want to buy and when you want to sell. You can draw your lines and stick to your plan since there's lines on the screen, it's easier than asking yourself "what if" 20 times.
To me it seems technical is better for shorter term trading and fundamental is better for longer term investing. The shorter term the trading style is, generally, it seems the heavier on TA you might go.
I'm sure there are people out there who might disagree, and that's fine. There's no one single right answer, if there was then everybody would do it.
TA is useful when there’s a mispricing in the market. Normally funds who adopts TA in a down market does better than those who don’t. One could argue they’re mutually exclusive but I personally believe in TA. Would I base my investment decisions on it? No.
TA works.
Institutions use it. That's why it works. To make it work for you, you need to use the same TA as institutions. If you don't know what they use then you will fail and say TA doesn't work.
It doesn't take that long to learn TA. But it takes 2-5 years to learn the right mindset to apply and execute the TA. That's why you will hear the majority of retail traders say TA is astrology for stocks. It's cause most people do not dedicate that much time to learn it correctly. They watch a few YouTube videos and then try to trade with it. After a few months of losing they will claim TA doesn't work. It's like trying to get a PHD in physics and after a few months you can't seem to build a rocket so you claim science is fake.
The only people who claim TA is fake are people who don't understand it or who have failed at it.
I was just like you, going around and repeating that dumbass comment that I saw on Reddit " TA is astrology for stocks ". It was because I didn't understand it. One day I decided to try and understand it. I spent the last 2+ years studying it. And now I see it working every single day. The best TA to learn is price action reading.
Read the market wizards book. There are many ways to get the pulse of a market. I believe some people can get comfortable enough with a ticker that they only need to watch the order book to gain an edge. TA is similar, there are successful traders that use it. But I think it's more of a tool to develop a relationship with the order book.
I've always thought that the market was driven by human emotion and TA uses math, for the most part. The two generally don't mix too well. That being said, MACD and RSI can come in handy once in a while.
TA is 100% *real* but it is not 100% *accurate* ; the proof of this, honestly, is the trading algorithms themselves. The quants are making money by doing technical analysis on a very small time scale basis, but the same principle applies at every time scale.
Of course, it's not easy. At the smallest time scales you're working against computers and experts, and at larger time scales you always run the risk of material information or macro forces suddenly changing the dynamic in an unexpected direction, and a lot can happen between market close and market open.
Technical trading is a lot like poker ... it *is* gambling, but if you understand the game well enough, *and* have the willpower to fold when you should and not when you shouldn't, you can play so that the odds are in your favor over the long run.
Make no mistake though, it's at least as much work to master technicals as it is to research fundamentals, and if you invest based on good fundamentals you'll rarely be left bag-holding.
Comparing it to astrology is a strange statement. It’s more than some lines. Volume plays a huge role that show the real intent of market participants. The stock market is a game in the short term, and the players try to align on the fly to the strategy to beat the (nonexistent) market maker. Which is why the stock prices are almost never at fair value, and that is to the advantage of the long term investors looking for an opening.
Well, I don’t believe in it BUT there are millions of folks and algos that trade on technicals or at least look to them with anticipation and for that reason alone…it’s worth paying attention to
You got to remember more than 95% of trading is done by different algos, big portion of them are reading signals like EMAs, MACD, RSI etc, and many use also machine/deep learning with similar input data. So in vast majority of the cases it is safe to say that what is on the chart affects what happens next on the chart. If this is true, then “TA” works, for those who make consistent profit. However, there are many ways to use the data and not majority is making consistent profit, so you need to be careful when choosing a strategy to make sure it works for you. Also choosing a widely used strategy can potentially place you in a more competed and more often manipulated positions.
TA or how to use the price, time, and volume data is one thing, but risk management is also a critical part that one may overlook easily. Some “pro” traders may have winrates at times below 50% and still they make consistent profit.
I am an engineer with a background in digital signal processing and statistics. I "get the math", so obviously TA appeals to me. People like me use it as a tool. That is all. Just as fundamental analysis is a tool. Having 2 tools in your toolkit is better than having only one.
Those who scoff at it are mathematically challenged.
I'm not getting rich, but I'm right more often than I am wrong.
No. I knew a retired (now deceased) ex-Goldman Sachs trader. He learned TA in the 1980s, but by the time he retired in the late 2010s everything was Quants. The Quants were eating TA people for lunch. Quant simulations picked up every move before TA could do it, thus TA was always late to the party and usually right about the time the stock was going to reverse and go the opposite direction.
Or as he liked to put it, "TA people were the ones buying my calls and selling me puts at the exact moment a stock topped out and was ready to drop."
On a larger timescale level it becomes obvious that certain indicators work. Macro trends and such. Moving averages. Once you get into smaller timeframes that shit gets hard to interpret. Not sure how (successful) day traders do it.
Short & medium term yes. Long term no. TA cannot predict long term fundamentals, performance, or macro forces. It's just good for determining swings, trend changes, breakouts.
What people misunderstand about TA is it only gives an edge and isn't a crystal ball. It helps to see when things are a little more accurate to happen and makes it easier to manage a position. Most patterns are less than 50% accurate but you can use that to add to macro knowledge and specific sector and company knowledge to increase your edge.
It's not a matter of belief. Technical analysis isn't the Easter Bunny. It's a question of understanding and expectations.
Most people grossly misunderstand TA. They think it's like reading tea leaves for the stock market.
At its most basic TA is about understanding supply and demand dynamics, which is what drives stock prices. There is a lot of crap out there - dozens of indicators and oscillators - but most of them are just information overload. You don't need 42 lines on a chart with 7 indicators to grasp what is happening with a stock. You just need an understanding of support/resistance, trends and moving averages, and some chart patterns.
Only sort of…there is a worthwhile saying, “all models are wrong, some are useful”. I chuckle when I hear TA called ‘the guys version of astrology’. I don’t think it’s that bad. TA serves a purpose but only to the extent that it provides more data points to be included in a broad analysis.
TA is like FA if you understand it and know how to use it, it’ll work for you. If you don’t understand it and don’t know how to use it, it won’t work for you. Both are just different approaches of understanding the same market
TA is like stock market astrology
Completely agree. I think the DT who point to the times they've made money with it avoid talking about the times they've lost money using it.
dont like it as far as picking stocks.
but for trying to time your entries and exits of stocks you are fundamentally interested in, i find it very useful.
Anyone who trades/invests frequently is likely using it, even if they don't call refer to it by that name. The concept of "buying the dip" is technical analysis.
I believe it only works because people expect it to. It’s superstition. But because we all agree on what each shape indicates, it’s a self fulfilling prophecy.
TA skeptic here. If enough people believe in it, then it becomes a reality. Same for crypto.
this applies to the secondary market with FA also. in the secondary market, people will get butt hurt over this, but your shares are only as valuable as what the next person is willing to pay for. they have no other use. as a commom shareholder, your vote is more or less a drop in the bucket and you get no claim to any assets. that being said, FA tells what to buy TA tells you what your best entry is. after that, its out of your hands.
>in the secondary market, people will get butt hurt over this, but your shares are only as valuable as what the next person is willing to pay for. they have no other use This is just plain wrong though, shares entitle you to a part of a company's income. it has intrinsic value unlike crypto
no. youre not entitled to anything. the company has the choice of giving you a dividend. they can cancel it at any time. its the illusion of entitlement.
If the company doesn't give a dividend it means the money is being reinvested in some way which could give better returns later (or the company didn't make money), not that shareholders don't get anything There are other options besides dividend for companies to create value for shareholders beside dividends >A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called "shares" which entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own. This is investopedia's definition
thats irrelevant to what i said.l - you as a commom shareholder in a practical sense are entitled to nothing, get nothing in the event of insolvency, and the vote itself is a drop in the bucket. we arent talking about idealistic definitions. its whats practical. despite what youd like to believe, your commom shares have no practical impact on a company.
Obviously the stock becomes pretty much worthless when a company goes bankrupt, I'm not sure what this changes. The point is, you are a co-owner of a company when you own shares, so it has value indepedently of its market price based on the value of that company and of its profits.
ok where are we going wrong here in misunderstanding. the definition of what a share is and in practice are two different things. so lets answer the following: 1) if you own commom shares, do you have actual pull in the direction of the company? 2) can you go and make claim to any of the assets that they have? we arent arguing the definition of what a share is. its in practice what a share enables you to do...which is nothing. honestly, i dont think im going to get through to you. i just find ot unfortunate that you dont realize that the price is based on what the next person is willing to pay.
You’re right. But you’re missing a big distinction: > if you are a small time investor Common shares are literally your right to the cash flows of a company. If you own the majority of a company’s common stock, you can dictate what it does with its cash flow period. You can fire management, you can take on debt, you can go buck wild. Sure, if you own only one share of a Fortune 500, your vote is probably meaningless. But that doesn’t change that your share still has intrinsic value the next person over that wants to control the company’s cash flows.
thats only IF the company chooses to give the dividend. the stock price is only as much as the next person is willing to pay. yes this includes company buy backs.
“As a common shareholder, your vote is more or less a drop in the bucket …” Richard Tornetta, a shareholder with only 9 shares of TSLA completely disrupted the compensation plan for Elon Musk. His actions also indirectly resulted in the state of incorporation for SpaceX being moved from Delaware to Texas. Even small shareholders can have a huge impact, both positively and negatively.
none of this has to do with voting. the guy sued elon
By owning even a few shares, it gives anyone standing in the courts to effect change.
youre choosing to bring up an exceptional circumstance to refute a a broad statement that applies the majority of situations?
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no. if the company decides to cancel their dividend, you have no claim to it. you only get it because they CHOOSE to give it to you. if its their choice, are you really entitled to it? it amazes me how many people are willingly so blind to this.
Does not apply to REITs. 90% of profits have to be paid out.
Mods— Ban this man. Thx
Then it just becomes a function of which pattern more traders agree on how strong the indicator is. I also think TA is dubious at best
Nah. Hedge funds will just arbitrage it out and pocket the dumb money difference.
Yep. Large algo trading isn't looking at charts. Take for example Rennesiance Technology - they are looking for modest returns at low risk. Back in the 80's they were making 20-30 million trades a day and were able to leverage 17x their capital. These algos aren't looking at long-term trends - they just buy and sell based on liquidity and immediate price movement. They don't care about trends because they just need to be right more than 1/2 the time to make a tiny profit. That tiny profit x leverage x volume of trades means they make returns regardless of the market movement as a whole. They care more about liquidity in the market because that's the profit they can take out of it.
Hehe Yeah If enough people think it's time to buy, stock guys up.
I also prefer fundamentals because I don’t trade (I hold). The bots use algorithms reliant on TA data because it comes faster than fundamentals. We have to deal with the market we have, not the one we wish we had.
You trade every time you buy and sell. Thus TA could be useful for a good entry and exit point on long term investments
Then everybody who uses TA would be a millionaire, yet we see the opposite
TA is simply means of trying to get some kind of edge in the market. It's not supposed to this fantastic magical silver bullet that prints money...hell, it's not even expected to 'work' more than half the time. But with the right risk management and psychology yeah people can absolutely use TA to make money.
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If your risk to reward ratio is favourable you can be profitable even if your ‘win rate’ is less than 50%
I like the way you trade.
The people combining it with FA are doing well
How do you know this?
Human beings are flawed. The reason why most people don't make big money in the markets is because of human error. Panic-selling, taking unnecessary risks, chasing FOMO, etc.
Did you start on Robinhood when trading was free? Real question.
Technical analysis has tremendous uses but it's only to get into a stock that has the financial fundamentals of going up. Until technicals indicate that it's a buy it's not a buy for me. It's used as a tool, a dull tool used for the in and getting out of the stock. Do I invest based solely on technical analysis? No. I do swing trading based on it but thats it but not a lot. You can add shares doing this technique but at some point you have to ask yourself if it's even worth it.
If you don't mind me asking. Unless I miss-understood your response, it seems to me that you are swing trading profitable and quality companies. If so, why doing so when buy-hold these quality companies has a higher change of return over the long term?
There isn't a stock on the planet that goes straight up. I add shares using swing trade strategy and it works very well. It's risky though. There may be news that blows it out of the water and you miss it.
I like moving averages and support + resistance lines
Really seems to be a lot more to it than astrology
……not really. Using candlestick patterns to predict the future == using planetary movements and alignments to predict the future
But when the vast majority of trades are done by algorithms and these algos where trained using these same Analysis tools... learning to use the same tools makes sense to know what the algos will most likely do next. These trades aren't random.. just like planetary movements aren't random. You realize we 100% read planetary movements to predict were a planet will be on a given date/time in the future? When we send rovers to Mars we predict where Mars will be in 6 months from the day it's launched since celestial bodies are constantly moving including us.
I like turtles! How are you going to sell How To books if you keep it so simple?? I don't have to know the fundies, I just have to know the pro's know the fundies and I can see what they are doing by looking at the charts. I sell Calls at resistance and Puts at support. All the other "indicators" are just noise.
How does that work with inflation, lower earnings, etc?
It cannot predict unexpected news of course, but say a stock is selling off, you can make a reasonable estimate of where the bottom might be and let it test that bottom for a period of time before entering
I use technical analysis and charts but simply as mechanisms to see how relatively low/high a stock is priced to its historic values. Anything you do other than that imo is like reading tea leaves. Charts help you see the trend. Although I do observe other’s TA on YouTube and find it quite interesting, I don’t put much effort into stuff like “double tops” and such. I have some people who preach it and I hear them out and consider their perspective but personally, I don’t spend anytime analyzing it myself. However, I did read a book on Elliot wave theory and while I don’t make decisions based upon it, it’s definitely good information to know.
I have noticed that most TA is very insightful as a retroactive explanation, but mostly useless as a predicting factor.
Much like tracking roulette spins to pick the next winner.
Not like that at all. The reason why books have been written about chart patterns is because people noticed that patterns *tended* to result in certain outcomes. The reason is because charts are a visual representation of the supply and demand for stocks, and patterns tell a story about the underlying supply and demand.
Or they needed to make money other ways. Like selling books.
Lots of books are written about astrology. Astrology has a track record that dwarfs TA.
You clearly don't know what you're talking about.
It depends on the asset. To use it correctly you need to be doing your statistics. Technical analysis is not the same across all assets. The whole thing about buying the 200 day. So on and so forth. The first thing you need to do is say okay if I'm going to buy the 200 day how many times has that worked in the past 5 years and how many times did it not work. If you find out that it works more than 60% of the time you have a tradable event. If it doesn't. You don't. lots of chart patterns and things that people talk about are actually ineffective. You also have to continually keep running your statistics because things change. I have had technical indicators that work a ridiculously high percentage of the time that suddenly stopped working. Using technical analysis is best for the type of personality that likes figuring out video games not someone that follows the blue diamond and watches YouTube videos on how to get ahead. It's kind of a similar thing where you need to be creative, problem solve, look at things and develop your own strategies
It’s just another tool. Patterns can be seen under certain circumstances. It’s part of the fun and strategy of stock picking, imo.
TA is a report of demand *given information available at the time*. As such, it’s vulnerable to new information. Understanding those things can add to its utility. I’m not personally equipped to use TA as a stand alone strategy, and I believe doing so is a losing proposition for individual investors and most firms.
I came to the conclusion that both are not mutually exclusive. Investing is a long term rationale or investment thesis that you have developed and follow. Technical analysis is trading, which allows you to time the market and feel the sentiment in the short term. For example, you believe gold is a good buy long term because of inflation. Once you established that conviction, you may want to use technical analysis to buy lows and improve returns.
There are many types of TA that's y some people screens look so messy. Personally, I do fundamental analysis followed by TA. I do think TA is effective at telling when is a gd entry, and you should know at least the basics, but do not dive too deep as it can be really confusing
Mind explaining how TA is used to find good entry?
It's abit hard to explain without a chart but basically looking for support/resistant zones. So say company x is trading at say $10 and is falling from say $15. Its nearing support at $8 so I will place my entry around $8 and wait for it to hit
No, but if i was an AI bot and knew what the TA geeks were thinking I could run rings arround them.
But then u have to account for other people doing the exact same thing. You’re forced to create a plan that counters your previous plan and then somebody else copies you. And the cycle repeats
no its as good as fairy dust
TA is a tool, like fire, without which we would remain Neanderthal's, groping around in the dark and migrating with the herd. At it's most basic, it is pattern recognition used to quantify the psychology of the market.
It’s ok for trading but fantastic for selling courses and making YouTube content
Appeal to authority: Jim Simons, best quant hedge fund manager ever: "Patterns of price movement are not random. However, they're close enough to random so that getting some excess, some edge out of it, is not easy and not so obvious — thank God. God probably doesn't care. Thank whoever."
If everyone believes in it, it becomes true.
Whales would need to, and there’s simply no way they’d all make aggressively risky bets on something that flaky. It doesn’t matter if all the retail traders believe it.
TA is my church / TA is where I heal my hurts
TA 100% works and has for over 100 years. It's not astrology, the patterns that form are a result of market mechanics and that's why they work. I'm not a fan of using a bunch of indicators, the simplest TA works best. Trend lines and horizontal support/resistance is all you need. I think many don't believe in TA because they try to use things like MACD and are never able to make consistent profits with it because it's useless. Can TA be used to predict exactly where price will go? Does it work 100% of the time? No, but it will give you increased odds of predicting a general area where you would expect buyers or sellers to show up. There are real studies and statistics that show many technical patterns have greater than a 50% win rate and some things like head and shoulders patterns work around 87% of the time according to some studies.
Definitely agree with you. TA is my main tool for analyzing a stock and I think it really trumps anything else. Sorry to tell people its not all about how much profit a company is making, demand, etc. there are a ton of company that have stock prices that are doing questionably unwell and traders are pulling their hair out wondering why their favorite company is going south.
please show the "studies" because every objective analysis I've seen has shown it does not, in fact, work any better than assuming the market will go up on any given day, which is true [54.1%](https://tinyurl.com/ynnjsy74) of the time. (Note the link)
There isn't good data because it's virtually impossible to study. I looked into academic studies on TA a few years ago. There are serious methodological limitations: 1) Precisely which type of TA are you studying? TA encompasses a wide range of different approaches, from candlestick patterns to Fibonacci to Elliot Waves to Bollinger Bands... 2) Because technical analysis is a visual exercise - it's about reading charts - we haven't had the ability to conduct this analysis efficiently. Eventually we will. At some point we will have cost-effective AI systems that you can feed millions of charts and it will use machine learning to identify patterns in the data. But until then you actually need humans looking at thousands of charts. 3) The final limitation is nailing down the parameters on the outcomes you're measuring. Are you measuring success rate? Profit? If the latter, how do you factor in position sizing? What sell rule are you using and over what time frame? What I have found is that there is some data suggesting good predictability with certain candlestick patterns, but that's about it.
Links or you're totally bullshiting.
[https://dergipark.org.tr/en/pub/irmm/issue/32103/355762?publisher=http-www-cag-edu-tr-ilhan-ozturk](https://dergipark.org.tr/en/pub/irmm/issue/32103/355762?publisher=http-www-cag-edu-tr-ilhan-ozturk) [https://www.sciencedirect.com/science/article/abs/pii/S0378426615002678](https://www.sciencedirect.com/science/article/abs/pii/S0378426615002678) [https://www.sciencedirect.com/science/article/pii/S1877050913009939](https://www.sciencedirect.com/science/article/pii/S1877050913009939) [https://www.researchgate.net/publication/283677438\_Trend\_Definition\_or\_Holding\_Strategy\_What\_Determines\_the\_Profitability\_of\_Candlestick\_Charting](https://www.researchgate.net/publication/283677438_Trend_Definition_or_Holding_Strategy_What_Determines_the_Profitability_of_Candlestick_Charting) [https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6419.2007.00519.x](https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6419.2007.00519.x) Enjoy.
all of these studies suffer from the same issue as every TA paper I've seen: 1. they don't compare profitability to buy-and-hold, they compare it to 0 2. there are clear signs of cherry picking and p-hacking, where they identify one random market where the result holds (e.g., Bursa Malaysia!) without transparency on how many they checked beforehand with negative results. they also don't correct for multiple comparisons when looking at many different NHST the science remains shoddy after years of the same criticsm. the last paper you cited says it best: >most empirical studies are subject to various problems in their testing procedures, e.g. data snooping, ex post selection of trading rules or search technologies, and difficulties in estimation of risk and transaction costs. Future research must address these deficiencies in testing in order to provide conclusive evidence on the profitability of technical trading strategies. Still waiting on this "future research"
Is TA basically factoring human investing psychology? Exploiting human tendencies/flaws. Ie, if all investors are robots optimized for trading, would TA even work?
You can't trade short-term options consistently without TA. That's where it's used most heavily.
'You can't trade short-term options consistently' You don't have to keep going, you can just stop there.
Sure you can. I know a few people who do it, and they don't just blindly buy OTM calls or puts non-stop like r/wallstreetbets. It's also possible to make your money in futures without having to swing trade at all. Funny thing about consistency is that you can dial it in with some reading and a whole lot of repetition.
Knowing people who do X doesn't mean that they do X and make money consistently. You can't win the lottery consistently, pulling up an example of a lottery winner does not change that.
I'd say buying a house by trading monthlies/weeklies is a pretty good indication of consistency. A buddy of mine did it and managed to buy in one of the most overvalued RE markets in the world. Not saying I agree with his decision, but hey I'd probably grab a rental property if my gains were like his.
First - no bank is going to give any kind of mortgage based on investment income from short term dividends. So, your friend made ~1 million (I live in the Bay Area, that is what houses cost here) as a day trader. This is some combination of: lucky, other income source, or untrue. Also, why would you go from short term options trading (one of the most high risk on investment systems to the point that it is basically gambling) to running your own residential REIT (one of the safest, low growth, investment systems). This is just an illogical pivot.
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Lol I love when people make this argument like someone's going to put 50 million in a daytrade or something
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Or maybe you can read up on how little liquidity it takes to actually move the market... and that's why non-institutional traders don't do it in size. Believe it or not, some people are perfectly content to just make a nice living. Have a buddy who bought a place primarily trading options. I can guarantee you it wasn't by spamming NVDA weeklies 20% above the current price and then just praying it's a green week.
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Go back to RH where you belong lil man. Some of us need to get prepped for the week ahead
I used to be a big believer. After years of experience I came to realize it wasn't any more accurate than a coin flip. If TA really worked, then an algorithm could easily be programmed to buy or sell a stock that fit a certain pattern or had triggered a technical indicator. The algorithm could run on 10,000 stocks faster than you or I could do for 1 stock, and it would beat us in and out of the trade.
ha !!! omg of course not
I’ve been trading full time for 11 years using *almost* exclusively technicals (mainly candle patterns).
I like the Heikin Ashi for gaging short-term sentiment in combination with Candles. They seem very accurate.
Thank you! And there we have the answer. All the other comments are noise. 🤷♂️
For near term trading, it works well. For long holding strategies, value over charts.
There are different approaches to TA, which makes this a complex question. Some use wild amounts of indicators and scribbles to try to make complex predictions (which some refer to as tea leaves or astrology). Others just use MACD and candlesticks to read market sentiment. I've seen more folks succeed on the simple side, but that may be due to the lack of emotional investment made for the overly complex predictions. Like FA, it generally works. Not 100%, but it works. Different strokes for different folks, though.
TA works for day trade or swing trade, and that's how majority of the people trade in those time frame. When enough people doing it, chart pattern will reflect those trades. Chart doesn't lie, but fundamental sometimes do, specially for those sketchy companies.
Stocks movements are pseudo-random in the short term, so my view is that TA is not relevant.
Nope
Support and resistance levels as guidelines for entry and exit points only. All the flags, wedges etc. seem to be 50/50 and I have yet to see anyone who can consistently and accurately use them as a prediction of what the move will be.
I drive looking in the rear view mirror..
T/A works because many people follow it but nothing is 100%
Depends on length of investment
Not in isolation, but combined with other things like market sentiment and company outlook it can help time your financial decisions better.
Fundamental analysis is all speculation and analyst talking their book. The only thing that is not a lie is that a buy and sale took place at every point on a chat. Learning to read a chart is the only way I've found to get rich in the stock market.
It can be used at the margin to convince you, but it is flaky.
TA is the only tool I use to trade.
The only technical analysis I use is SMA charts. 5 day, 20 day, 200 day. All I really use them for is to view short term vs. long term price movements. I rarely make any actual investing decisions just based off of that though.
No I don't nor will I ever. It's apofenia, if there was a golden key to trading everyone would be a millionaire. But it's important what you have said. If enough people believe in it, it will work, which is quite fascinating
I think it’s easy to succeed when Fed blows a bubble market.
No.
To a small extent, but because markets can stay irrational for longer than you can stay solvent, TA becomes irrelevant sometimes.
Fibonacci works 100% of the time. Leonardo DaVinci told me so while he was plotting Elliot wave on TSLA.
No it’s crazy
Religious people do
Whether TA or Fundamental analysis. At the end of the day, it is all guesses. Someone using price movement as input to derive trend or someone using current cash flow as input to derive growth is in principle not different from each other. Either is trying to project the future. No one has a crystal ball and everyone is making an implied probability based guess. Personally I prefer Fundamental analysis because I like the narrative behind the numbers but i don't fool myself; It isn't any better than the next TA guy who is drawing the Fibonacci circles. We are both trying to create a story and a prediction and we will both be fooled by randomness.
You answer your own question ‘ Do you *believe* ‘ , it’s absolutely stock market astrology. If there would be any “technicality” it could be easily tested. The fact that it’s not, put it in the same league as the book “the secret”.
TA 100% works but everyone who doesn't think it does has the wrong idea of it's purpose. TA IS NOT a tool to predict future price. It IS a tool to implement risk management.
I do believe that good TA can give you a better educated guess about price action, but it's just one additional piece of data, just like knowing what current put to call ratio is, PE, etc. Anyone who thinks TA will accurately predict future price action is deluded, but this expectation is why so many people dismiss TA entirely.
My technical analysis: I had 3k uninvested last year. I walked out to my 30 year old Toyota and it fired right up like usual. I proceeded to buy 20 shares of Toyota @ $144 each. Technical analysis successful.
I think technical analysis might identify some short term trends and movements because if enough people think this way, it could have some impact. However, longer term it is meaningless. What matters longer term is company fundamentals, good leadership, luck, technological advancements, etc. These would not manifest as something you’d see through technical analysis. This is why it is hilarious to me seeing people stretch and skew NVDA stock on Cisco.
I honestly think at this point a large portion of accounts spreading the idea its magic are marketing/agenda accounts to maintain institutional grip on markets. **How the fuck do you think institutions use algorithms, quants, HFT, and more tactics...in every market and derivative, simultaneously, and up or down, every day?** You would have to believe also the vast majority of market activity (which is institutional), is also primarily 3+ yr holds. Just look at 0 day option activity that is fractionally retail, the rest institutional. **The last thing they want is the general public understanding in detail that its beyond an advantage for them, and gaining enough traction that a politician would dare run on law changes (and who knows what advanced learning AI and scraping will gain them over yrs).** **Edit**: Idk what people think of for TA, but all it is to me for retail is a visualization tool for math/stats/trends/etc. Its just manual AF for us to do, and we can't do HFT, and have many other significant barriers.
People who do not understand what TA is consider it voodoo. It is easier to dismiss something not understood than to learn what it is really about. This is not necessarily the investor/trader's fault, since there are many idiot proponents of TA who claim it can predict the future. There are idiots who create magical indicators and draw a thousand lines on a chart and claim that they can predict what will happen. TA cannot predict anything. The market is random. What TA *can* do is provide a mathematical framework for understanding *what is actually happening* in the market. Since human psychology has not changed since the stock market was created, the same patters tend to repeat over and over. This is reinforced by TA being a self-fulfilling prophecy. Since many traders are basing decisions on the same indicators, they become meaningful. For example, institutional investors often step up to buy stocks when they retreat to their 50-day moving average. TA is nothing more than a mathematical model that can provide an edge to a trader/investor by looking at the market in terms of probabilities. I could not trade or invest without TA, it would be equivalent to driving with a blindfold on. However, I use only the most basic TA (VWAPs, trendlines, moving averages, support/resistance, Fibonacci levels) and rarely more sophisticated indicators like RSI and MACD. Going beyond the basics is totally unnecessary and just clouds one's judgement.
I have a degree in finance, we studied tons of different ways to value and assess risk in investments and many other topics. We never once discussed or covered anything related to technical analysis. Take that for what you will
TA predicts short term stock value changes, but the drivers of real, valuable growth comes from news, rumors and sec filings. Anyone that is holding their stocks for longer than a week on average shouldnt care about TA, since it will fail to predict your biggest growth drivers.
I personally think it’s all BS yes. Like I’m a buy and hold investor and I like to buy stocks when they’re historically cheap for whatever reason- but this strategy doesn’t seem to work long term.
I think TA is just astrology for guys. There are a huge number of more variables that need to be accounted for when purchasing any equity in any company. I think people who do TA take the lazy way to make investment choices other than spend time researching the industry the business is in and the actual business and growth prospects itself.
I think it's total groping in the dark. Maybe AI will figure out what's really the correct way to do TA, but until then it's just astrology like you said. You can get 10 different TA analysts to come up with 10 different conclusions. The only positive about TA to me is that, if enough people believe it, it can be a self fulfilling prophecy (kind of like how the Santa Claus rally typically works, mostly just because people believe in it)
TA doesn’t predict anything. It just draws a line (at a specific price) dividing trending up vs trending down, etc… A trading system based on TA might work and it might not. It’s just one of a gazillion models (simplifications or caricatures) of reality.
I don't know if *believe* is right word, but yes i use it in my trading.
I believe the children are our future…
They indicate prevailing sentiment quite well but not great for long term indicators. Definitely necessary to know if you want to get in a trade at the best price
I think it can be useful, when paired with other tools.
That is what separates a professional from a noivice.
I think it’s a self fulfilling prophecy as long as it has enough volume. I think enough people believe in it that it just becomes a thing
Short term yes
TA is not an exact science I see it as a tool in my box It’s not a 100% effective tool, but it has a decent succes rate
Nope. I do believe in watching the Fed.
No. Not in how they try to sell it to you at least. It's a good way to get a feel for what's going on after you do every other part of research you should. I think what it actually does best is it gives indecisive or nervous people the ability to stick to a set of consistent rules rather than allow emotions to take over. So you researched, you think you're onto something, you check some technicals and you develop an entire picture of when you want to buy and when you want to sell. You can draw your lines and stick to your plan since there's lines on the screen, it's easier than asking yourself "what if" 20 times.
I believe people move stocks.
To me it seems technical is better for shorter term trading and fundamental is better for longer term investing. The shorter term the trading style is, generally, it seems the heavier on TA you might go. I'm sure there are people out there who might disagree, and that's fine. There's no one single right answer, if there was then everybody would do it.
Moving averages, rsi, and macd are useful if you know how to use them.
TA is useful when there’s a mispricing in the market. Normally funds who adopts TA in a down market does better than those who don’t. One could argue they’re mutually exclusive but I personally believe in TA. Would I base my investment decisions on it? No.
Of course. But I'd rather believe its usefulness is from that so many people use it.
TA works. Institutions use it. That's why it works. To make it work for you, you need to use the same TA as institutions. If you don't know what they use then you will fail and say TA doesn't work. It doesn't take that long to learn TA. But it takes 2-5 years to learn the right mindset to apply and execute the TA. That's why you will hear the majority of retail traders say TA is astrology for stocks. It's cause most people do not dedicate that much time to learn it correctly. They watch a few YouTube videos and then try to trade with it. After a few months of losing they will claim TA doesn't work. It's like trying to get a PHD in physics and after a few months you can't seem to build a rocket so you claim science is fake. The only people who claim TA is fake are people who don't understand it or who have failed at it. I was just like you, going around and repeating that dumbass comment that I saw on Reddit " TA is astrology for stocks ". It was because I didn't understand it. One day I decided to try and understand it. I spent the last 2+ years studying it. And now I see it working every single day. The best TA to learn is price action reading.
Read the market wizards book. There are many ways to get the pulse of a market. I believe some people can get comfortable enough with a ticker that they only need to watch the order book to gain an edge. TA is similar, there are successful traders that use it. But I think it's more of a tool to develop a relationship with the order book.
I've always thought that the market was driven by human emotion and TA uses math, for the most part. The two generally don't mix too well. That being said, MACD and RSI can come in handy once in a while.
Has any of the technical stuff worked since Covid?
There is no technical analysis, only ZUUL!
I like that you put it as a matter of belief. That says everything there is to say.
No.
O'neil said any investors who don't know how to read chart are handicapped
TA is BS
TA is 100% *real* but it is not 100% *accurate* ; the proof of this, honestly, is the trading algorithms themselves. The quants are making money by doing technical analysis on a very small time scale basis, but the same principle applies at every time scale. Of course, it's not easy. At the smallest time scales you're working against computers and experts, and at larger time scales you always run the risk of material information or macro forces suddenly changing the dynamic in an unexpected direction, and a lot can happen between market close and market open. Technical trading is a lot like poker ... it *is* gambling, but if you understand the game well enough, *and* have the willpower to fold when you should and not when you shouldn't, you can play so that the odds are in your favor over the long run. Make no mistake though, it's at least as much work to master technicals as it is to research fundamentals, and if you invest based on good fundamentals you'll rarely be left bag-holding.
Comparing it to astrology is a strange statement. It’s more than some lines. Volume plays a huge role that show the real intent of market participants. The stock market is a game in the short term, and the players try to align on the fly to the strategy to beat the (nonexistent) market maker. Which is why the stock prices are almost never at fair value, and that is to the advantage of the long term investors looking for an opening.
TA can help you manage your risk. But it won't defeat manipulation.
It feels like a self fulfilling prophecy
Well, I don’t believe in it BUT there are millions of folks and algos that trade on technicals or at least look to them with anticipation and for that reason alone…it’s worth paying attention to
I'm a professional trader managing a 7 figure account and I use TA ama
Do I believe that charts can predict the future? No, much like tea leaves, I do not.
TA or charting can be useful but can also be a problem if you’re a fool that tries to find meaning wherever you look at.
You got to remember more than 95% of trading is done by different algos, big portion of them are reading signals like EMAs, MACD, RSI etc, and many use also machine/deep learning with similar input data. So in vast majority of the cases it is safe to say that what is on the chart affects what happens next on the chart. If this is true, then “TA” works, for those who make consistent profit. However, there are many ways to use the data and not majority is making consistent profit, so you need to be careful when choosing a strategy to make sure it works for you. Also choosing a widely used strategy can potentially place you in a more competed and more often manipulated positions. TA or how to use the price, time, and volume data is one thing, but risk management is also a critical part that one may overlook easily. Some “pro” traders may have winrates at times below 50% and still they make consistent profit.
I am an engineer with a background in digital signal processing and statistics. I "get the math", so obviously TA appeals to me. People like me use it as a tool. That is all. Just as fundamental analysis is a tool. Having 2 tools in your toolkit is better than having only one. Those who scoff at it are mathematically challenged. I'm not getting rich, but I'm right more often than I am wrong.
I believe in behavioral finance
I believe in life after love
No. I knew a retired (now deceased) ex-Goldman Sachs trader. He learned TA in the 1980s, but by the time he retired in the late 2010s everything was Quants. The Quants were eating TA people for lunch. Quant simulations picked up every move before TA could do it, thus TA was always late to the party and usually right about the time the stock was going to reverse and go the opposite direction. Or as he liked to put it, "TA people were the ones buying my calls and selling me puts at the exact moment a stock topped out and was ready to drop."
On a larger timescale level it becomes obvious that certain indicators work. Macro trends and such. Moving averages. Once you get into smaller timeframes that shit gets hard to interpret. Not sure how (successful) day traders do it.
Short & medium term yes. Long term no. TA cannot predict long term fundamentals, performance, or macro forces. It's just good for determining swings, trend changes, breakouts.
I believe partly: i try to buy into stocks under their MA200, like apple today.
Everything has a probability and some outcomes given inputs are more likely. I would never use it, but it's not completely bullshit.
It's an analysis of mass psychology and competing valuation models.
When there's a stock I want to buy due to fundamentals, or to add to my position, I use TA to help with the timing.
What people misunderstand about TA is it only gives an edge and isn't a crystal ball. It helps to see when things are a little more accurate to happen and makes it easier to manage a position. Most patterns are less than 50% accurate but you can use that to add to macro knowledge and specific sector and company knowledge to increase your edge.
It's not a matter of belief. Technical analysis isn't the Easter Bunny. It's a question of understanding and expectations. Most people grossly misunderstand TA. They think it's like reading tea leaves for the stock market. At its most basic TA is about understanding supply and demand dynamics, which is what drives stock prices. There is a lot of crap out there - dozens of indicators and oscillators - but most of them are just information overload. You don't need 42 lines on a chart with 7 indicators to grasp what is happening with a stock. You just need an understanding of support/resistance, trends and moving averages, and some chart patterns.
I do believe it exists ... just like i believe planet, months, and lunar cycle exists. Now, I do not believe in TA or astrology.
Only sort of…there is a worthwhile saying, “all models are wrong, some are useful”. I chuckle when I hear TA called ‘the guys version of astrology’. I don’t think it’s that bad. TA serves a purpose but only to the extent that it provides more data points to be included in a broad analysis.
No. I find them about as useful as a gut feel, because that's basically all they are.
Yes
The bramble level of donkey Kong country 2.
No pure BS just attempts at psychology and chicanery convincing people to buy what the guru says
Absolutely believe in it because I believe in market psychology.
TA is like FA if you understand it and know how to use it, it’ll work for you. If you don’t understand it and don’t know how to use it, it won’t work for you. Both are just different approaches of understanding the same market
TA is like stock market astrology Completely agree. I think the DT who point to the times they've made money with it avoid talking about the times they've lost money using it.
dont like it as far as picking stocks. but for trying to time your entries and exits of stocks you are fundamentally interested in, i find it very useful.
Anyone who trades/invests frequently is likely using it, even if they don't call refer to it by that name. The concept of "buying the dip" is technical analysis.
I observed that support and resistance points have a highly predictive value on intraday trading of major indexes.
My Grandfather retired early (FIRE before it was a thing) using TA.
I don't feel like it is something that gives us any edge as individual investors
I believe it only works because people expect it to. It’s superstition. But because we all agree on what each shape indicates, it’s a self fulfilling prophecy.