My Experience With Technical Analysis
So, I now that technical analysis can be a somewhat controversial topic. Many people only use fundamental analysis, which prompted me to write about it. (Access my post on fundamental analysis by clicking here.) You may however just be reading this post because you’re new to trading or investing. You might also just want to know how effective technical analysis really is. Whatever the case may be, I’m glad you’re looking into the matter more seriously. I personally have benefited from technicals and I think you might too.
So, here is my experience:
When I first started trading, I heard about technical analysis but didn’t really pay attention to it. In fact, it took me months before I actually started looking into it. To be honest, learning technical analysis skyrocketed my trading career. In most cases, I would even go as far as saying that technical analysis is essential for success in the markets. The good thing is that it’s not hard to learn. In truth, it is rather easy. Yes, it takes some time, but that’s how you really get good at it and develop some intuition based on experience.
At first, I just used some basic indicators like moving averages, MACD, RSI, which is all you really need even when you’re more advanced. I began the learning process by going through charts and looking back at past moves of stocks. By doing this, I noticed patterns that would be repeat consistently. Eventually, I built my trading style around those patterns and added some extra indicators and personal rules.
Why does technical analysis really work?
Even if you’re sceptical about technical analysis working, you can’t disagree that people use it. That is one of the main reason why it works but it’s not the most important. Basically, the pure fact that a lot of traders use technical analysis impacts how stocks move. By not using technical analysis you are putting yourself at a major disadvantage. You should learn the basics to at least be on a more even playing field. But, like I said before, there is much more to it. Technical analysis gives u a way to track and calculate repeating human behaviours. In other words, you learn more about the behaviour of traders, which is key in understanding how markets move.
Honestly, it is disheartening to see people just throw money at stocks without even knowing what they’re getting into. They may unknowingly be entering long positions when the stock is heavily overbought for example. It is a recipe for disaster. But, if you learn technical analysis, you will profit of the people who make those mistakes. Yes, it’s kind of harsh but it is the name of the game. The path to success in trading or even investing is to become as systematic as possible. This means that you don’t just trade on a whim, you have to map things out and plan.
Like I said, technical analysis does really work, at least in my opinion. There is no good reason to only use fundamental analysis in today’s age. Of course, even with technical analysis, trades can and will go bad. Even then, you will exit trades at the right time and cut losses based on the technicals appearing on charts. Learning the art of technical analysis will make you a much more knowledgeable and well-rounded trader. Hopefully, you will be able to benefit from it like I and many others have. I will do my best to make a thorough guide on how to do technical analysis properly in the future. So, stay tuned!