It is the study of the essential issues like PAST DATA, PRICES, and VOLUMES to obtain the capacity to forecast the direction of prices in a market so that traders could take appropriate positions. Some renowned experts have expressed negativity too. HOWEVER, we will deal with the discussion from both sides of “what people believe” and “what the realities are.”
Certain Myths And Realities of Technical Analysis
Some people believe that CHARTS IS EVERYTHING. It may be noted that CHARTS shouldn’t be understood like a bible for investing in stock markets. For instance, different indicators in the technical analysis itself would give different signals of buying and selling… One must be incorporating his own judgment and skill to make an interpretation. Certain factors which can’t be felt in CHARTS should also be taken care of.
Some people consider TECHNICAL ANALYSIS AS A SCIENCE that will give them accurate answers. Frankly to put , Technical Analysis could be regarded as an art which gives us probable answers to our questions of whether the prices will go up or fall down etc., Any trader who has reasonable experience in the markets could clearly tell us that he got into deals with losses even after appropriately following the clues he obtained from Technical Analysis.
Some people believe that TRADING WITH TECHNICAL ANALYSIS METHODOLOGYwill give them good profits and in turn wealth in no big time.
Let’s understand that the market is an environment which is under the influence of a huge number and variety of factors. Prices, in turn, move up and down on the basis of such influence. Only three situations can happen in a market, namely stable price, increased price, and decreased price. Even after applying all the TECHNICAL ANALYSIS techniques, Various other methodologies, people might face the reverse of their expectations, since, no human being can practically and perfectly take into account, all the factors which will determine the movement of a PRICE. So, just because you have TECHNICAL ANALYSIS tools, on the one hand, you can’t be assured Wealth on the other hand
Some people believe that it’s a good tool for them in UNDERSTANDING THE DIRECTION OF THE PRICE for a smaller time frame. We could agree to them to a good extent. This dependence on TECHNICAL ANALYSIS would give strong strength to probability assessment in the case of intra-day traders, swing traders, trend traders, etc ., They could confidently position their trades at approximately the right buy and sell points. For instance, there would be the very high probability for a stock chart forming an ASCENDING triangular pattern to MOVE UP and for a stock which forms a DESCENDING triangular pattern, to COME DOWN in the near short term. HOWEVER, people having intentions of staying with a stock for the long term should consider factors in a holistic manner. The importance of TECHNICAL ANALYSIS tools, Fundamental Analysis Tools, Trends Of Sectoral Growth, Possible Governmental Support, etc., are to be considered for long term investment.
Some people believe that they will run into good profits if they have GOOD SOFTWARE which has TECHNICAL ANALYSIS tools in it. Let’s think with our common sense. Let’s believe that NO SOFTWARE can ever replace the human capacity in terms of decision making. Software is developed in such a way that it gives buy and sell signals on the basis of program factors. Markets CHANGE with many factors that come up every second in the modern world. There is always a big probability that new factors wouldn’t be considered by the software. As a result, it would be better if we develop a mixed strategy of using the software as well as our skills and experience and the current developments in the market, to come out with appropriate buy and sell signals and make our financial health less prone to illness.