Should We Suspect Technical Analysis

[Tobi]

Technical analysis attracts all retail traders. It is their easy shortcut to becoming millionaires. Adopting technical analysis allows one to dispense with any other auxiliary understanding like fundamentals or market psychology because price already discounts (reflects) all information whether known to the trader or unknown. Unfortunately this prevailing and conventional practice conforms only to the conventional result of retail traders. An infamous study showed that less than 2% of traders were profitable net of all fees. In fact: 40% of day traders quit within a month, 87% of traders quit within 3 years, 93% of traders quit within 5 years.You can read the full study here .Discipline and risk management only slow down the loss and prolong the survival duration.

 

[gwolf666]

The technical analysis technique definitely appeals to many retail traders as it offers a quick way to try and find profit opportunities. However, as you mention, this approach focuses solely on price, ignoring important factors such as fundamentals or market psychology. While it can be a useful tool, the fact that so few traders are truly profitable (less than 2%, according to studies) indicates that technical analysis alone is not enough to ensure long-term success. Discipline and risk management are essential, but they do not guarantee consistent profits, especially if you do not understand other deeper aspects of the market. This is why many traders end up quitting after a while. How do you see the relationship between technical analysis and other areas such as psychology and risk management in your own trading approach?

 

[kit_hung]

Technical analysis attracts many retail traders because it seems like a shortcut to get rich quick. The basic idea is that the market price reflects all information, so there is no need to worry about other factors such as company fundamentals or market psychology. However, the reality is quite different from the expected results.