So, while I color myself a TA skeptic, I still tend to marvel at the near-surgical precision of which the market tends to move in certain cases. Observing the above picture, I’m yet again amazed to see the bitcoin price just reaching the descending trend line just under $12,000 before continuing its downward trajectory. How can it be, that while the empirical evidence for TA disproves its relevance, these TA bulls-eye calls appear again and again?
There is nothing to marvel at. It is called expectancy bias (https://en.wikipedia.org/wiki/Observer-expectancy_effect), more specifically:
- Post hoc analysis (https://en.wikipedia.org/wiki/Post_hoc_analysis) -- you search the data until you find something that looks significant, and
- p-hacking (https://en.wikipedia.org/wiki/Data_dredging) - you will find what you are looking for somewhere in the data if you search it well enough.
Another major contributor to the belief in pseudo-sciences such as astrology and TA is confirmation bias (https://en.wikipedia.org/wiki/Confirmation_bias) -- you notice the evidence that supports it, but ignore the evidence that refutes it. Street light interference phenomenon (https://en.wikipedia.org/wiki/Street_light_interference_phenomenon) is a great example of confirmation bias.
