Topic: Technical Analysis - logical explanation - Poll (Read 528 times)

It seems to me that fundamental analysis works better than technical analysis. I saw some confirmation of these words. I think this is due to the fact that crypto is constantly evolving and some old laws are no longer valid.

I have already met many opinions in this forum that technical analysis does not work. It seems to me that now you can be a successful trader without even understanding the technical analysis.

I still use TA and it works for me with a little adjustment for crypto markets. Fibonacci works all over the world in many different forms and use cases. I support my trading with TA and Fibonacci works with BTC and I can't complain. We all know that TA is one of the factors of trading. I support my decisions with it and additional pieces of information.

TA has to be tweaked when used on the crypto market. It is not easy to use Stop Loss and Take Profit feature when backed up with TA is not working as on FIAT markets because of very high volatility and market manipulation.

When it comes to news I try to avoid trading them because one can never know if big positive news would bring a price spike. I have seen price spikes after bad news and significant drops after huge positive announcements. So I try to not trade when some big new occurs. Keep follow my strategy and cut the losses on bad events.

If it works for you than go for it. Its all about to earn.

For me it never worked. I started trading on stock market, found great up-trends and jumped into them - trends was easiest for newbie. Few days after it appears to be the last day of uptrend and downtrend started with me on board. Normally i would sell but i found closest support which was only few % lower. I decidet to hold and i was right. It bounce from support few %. I was happy for few days and than secon wave started... TA says that we are in unptrend currently. But dont says when will uptrend end. That was my first lesson - trends are made to be break and all of them will be broken someday and you will never know if it isnt now. TA is not only trend. Its patters, average, fibo, RSI, boll and dozens of indicators. I've tried them all.

After 2 years on stock i moved to crypto mainly to gain experience faster. Here i can trade on 15 min candles with the same volatility as on 1day candles on stocks. I made thousands of trades. I found strategy that works for me. Its just price. I buy cheap coins from panicked investors and sell when they come for their coins. I didnt stop do AT analysis. But only to know when will AT lovers buy to see what volume will they made, to know who is on market (low volume bounce made in TA buy oportunity means that TA lovers are buying - if there is no whale on market it will stop, volume will dicrise and few min after that price will continue to drop and accelerate on AT sell oportunity hitting in AT lovers stoplosses).

Ask my whife now. When she come back from walk with my son and see me eating my desk with fury in my eyes. There is allwais the same reason - i tried to give AT one last chance and... again whale raped my ass by showing me pattern which looks like from TA book with indicators screaming buy and huge red candle after my buy offer. For me TA works in 30-40% (just like you said - not alwais) but it makes it more useless than roling a dice (1-3 buy 4-6 sell - 50% accurancy). TA sometimes works... coin toss too. Everything sometimes works. Even if you buy alwais in monday on 9:15 and sell in thursday on 10:47. It will also work sometimes.

1-90% traders are loosing
2-If 10% of traders are winning they have to win 10 times more that those 90% lost - the only explanation is that they invested 10 times more - they are whales
3-most of investors are using TA indicators (common knowlegde - evey traders first thing entering trading is learning TA)
4-If whale want to earn he will try to earn on 95% TA lovers traders or  5% non TA traders? If TA gives sell singal is the best option for him to buy coins without pushing price (hude supply). If Ta gives buy signal its the best moment for him to take profit (huge demand) because most traders use TA now. And most traders have to loss to make whales win.
5- in 1920 most of traders didnt know what TA is. Thats why using it for whales makes most of traders loss and for them win.

TA works for trading bots but its like pump and dump singal group. TA buy indicator, TA bot buys in less than second pushing price, TA lovers are buying pushing price, TA bots are selling to last TA lovers.

TA has worked for me a lot of times than it did not work. The problem with a lot of wannabe traders is that they always expect 100% possibilities of a market moving in their favor when using TA but in the real sense, things just do not work this way. You can expect that the market will move one way and then get to see it another way. One thing I have known though, is without TA you will still be making worst decisions anyway so what is the point trying to avoid it?

Technical analysis still works but the fact is that as a trader and a professional one, you should know better not to rely fully on analysis and expect that it would always come out as you expect as there could be some time, when some few things can just change and then you see it happening the other way round.

Technical analysis simply is just to check out possibilities of an outcome based on some patterns you see on the chart, which a lot of times it has worked, and you still obviously cannot do without it as a trader.

In my case, technical Analysis never worked when used alone, at least in the crypto market and commodity market but if it is used with fundamental analysis, it somehow greatly contributes to the success of the prediction and sometimes throws it off. For this same reason, I only use technical analysis only when I cannot decide using fundamental analysis alone.

agreed. TA helps understand market but as long as you try to understand it. Jumping into coin by seeing double bottom, flag or wedge or any other patter without thinking and money managment will lead to loss.

Money managment and admitting loses is even more important that enter point as long as you are aware of fact that there is no trader with 100% accuracy. And no universal tactick, indicator, patter that will alwais make you win.

I still standby that charts can only help you if you are experienced with how the markets work.  I am convinced that people don't in a general sense even understand the relation of USD/BTC/Altcoins and how the markets fundamentally operate and move. Technical analysis in my opinion basically is just zones or areas to look at it and apply it to the fundamentals, experience, market conditions, etc and making a sound decision off of all of these.   If nothing else, technical analysis is great discipline because the biggest mistake I see new traders making is they buy at the wrong times (which is awful because in trading this is seriously the only thing you have pure control over is when you buy a coin and at what price and what position it is in), and sell way too late or way too early, and they have no idea or inkling of what this looks like.  Traders, in general, cannot detach from their love of their coins, and don't have the discipline to sell even if it might continue going up, or sell at a loss to avoid disaster because they're just too busy being human and in euphoria.   So  EVEN IF NOTHING ELSE, trading on fibonacci zones or following just the "ABC" Elliott Wave correction theory where you don't buy into a correction until an established bulltrap.. or if there's a TK death cross or we're wicking hard on these moving averages with nowhere to fall to...then even if its not working correctly will most likely stop and give people some rules and things to look for so they don't base their decision purely on greed and emotion, and I almost guarantee that 9 out of 10 people would do better (even if the success of the technical analysis is purely coincidental on making them avoid emotional trading).  Technical Analysis isn't the key to trading... discipline and knowing how the markets work is... but the catch is technical analysis is needed to help form disciplinary habits.

In your case, technical analysis is never successful when used alone, at least in the kriptocurrancy market and commodity markets, but if used with fundamental analysis, it somehow contributes greatly to the success of predictions and sometimes makes it fade. So basically I think you can try using it, but you can not stick to your analysis, and you have to accept that even if you do everything right, you have to be willing to change because there are other things that control the exchange market.

You all need to understand that those price movement is made by investors making decision (to sell or not to sell). Its not magic chart that will act like pattern is saying because TA said that. It is alwais investors decision. And those investors are alwais uunder pressure of greed or fear. Without TA in 1920 those emotion was main factor creating price. Those price movement was calculated into patters that you are using now. But when you are using this patters your transactions are changing it, there is yours buy transaction pushing price higher where there was no buy transaction when those patter was not presented to masses. Thats why those patters can work as long as noone knows about them. And most of patters and TA indicators are known from 1920. Thats why data from which those indicators was created is different now. Also we have now trading bots, ai bots, arbitrage bots what was unpresent in 1920 when those patters was created.

Emotion is way far from it just like you have mentioned. TA is making use of patterns to estimate the possibilities of where a movement can turn out to be and it is always better to see those breakouts or the movement in a way and the volume on such breakout before making a move and without discarding the use of stop loss. I guess a lot of traders who are just starting assume that TA will always work every time without the possibilities of going not as expected, but if it is like that, stop loss would not even have been a thing even for professional traders.

I want to believe that what most wannabe traders usually have in their mind is that TA will always give them full profit and no possibility of having loss and this has been a huge problem for a lot of them.

TA works pretty fine and I have never stopped using it, but depending on how volatile a market is, you should always know that there would be some time when TA will not simply give you exactly what you expect and that brings the idea of identifying support and resistance with the patterns you see with TA, and knowing when you should be stopping loss. I feel it is high time people started adding that to what they should be learning in their TA as it is way crucial.

Well as usual, I think technical analysis works, but it wont be able to surpass fundamental analysis or, unfortunately, market manipulation. Sometimes everything just looks perfect, and you can earn some decent bucks on technical analysis alone, but some bad news come up (mostly fud), and it all falls apart. So basically I think you can try to use it, but you can't just stay to attached to your analysis, and you must accept that even if you do everything right, you must be willing to change because there are other things controlling the market.

You are right. Thats why in my opinion in 1920 TA worked well. Becouse noone was using it and it gives advange to those who use it. Now, when first thing that you are facing with entering trading is TA than knowing TA give you no advantage. It become to give disadvange becouse your moves are predictable for whales.

And without advantage over other investors there is no profit. Becouse on market when one is winning other one is loosing.

I am tired to repeat that TA is not a grail and having studied TA you will not be successful as it seems. Let us imagine that TA works fine then every person may be successful on market having studied TA but it is not. And another reason why TA does not work because there would be trading robots in this case.

I am really interested and in love with technical analysers, but I am too lazy to get deep in it, and without getting deep, I believe it is useless

In my case, technical Analysis never worked when used alone, at least in the crypto market and commodity market but if it is used with fundamental analysis, it somehow greatly contributes to the success of the prediction and sometimes throws it off. For this same reason, I only use technical analysis only when I cannot decide using fundamental analysis alone.

Its not about calculating emotions. Its about calculating data.

For example
If most of investors have full panties and sell when price drops and you can observe that price is slowly going down and then accelerates then you know that investors are "panic selling".
Now if in most situations that happend when price is crossing 100 day average - than you have first TA statemant - sell when price is crossing 100 day average. Now people are selling when it cross 100 day average becouse TA is telling it them. But beafore TA was made they was selling becouse they had full panties. By observing this data and charts full panties indicator was made  and called "sell when crossing 100day average"(<1920 situation. Not current! )


Talking about emotions im talking about how TA was developed in 16-18 century. Taking data from invesotrs who invest when TA was not developed. Not how it dont work by crypto pump and dump actions. I also didnt write nowhere that u should use emotions together with TA. I write that when there was no TA it was developed by price and volumen change caused by transactions made by investors. And current investor is totaly different that the investor who gives data to TA.

Market is a place where we have winers and loosers. Saying that MACD RSI BOLYNGER will make you alwais win leads us to no loose. Its all about that in 1920 when noone knows what TA is someone invented methods to be better than others. Calculated by observing chart that invesotrs are more often shitting panties and sells when ...  Now when average investor is trading bot who knows TA better than others and use it faster than others, dont gamble than playing this game manualy will alwais make you piggybank for bots. Only being better gives money.

In this topic i just want to say that TA was made to be better than 1920 investor. But there is no 1920 investors now. There are 2018 investors. Full of trading bots, TA lovers, whales, market and transactions looks totaly diferent. It means that Data from which TA was made is different now. We are not fighting against 1920 investor to use wepon developed to fight against him.

And that was my mistake making this post. I should use "investors psychology" instead of "emotions". English is not my native language. Thats why i sometimes use wrong word.

How do you calculate emotions? I don't think emotion is even a factor to consider in technical analysis. I think you should have used the word pattern instead of emotion. To come up with a good technical analysis you need to use tools like RSI, MACD, Aroon Indicator and more. This tools uses statistics, trends, patterns based on the trading volume and also price movement.

If a trader Buys or Sell based on emotions then that is not technical analysis, they are trading based on chances and luck. Those who uses emotions in trading are more likely to lose money. Example is when a coin is being pumped, if you use your emotion, most likely you will Buy (FOMO), but if you use TA, like RSI or Bollinger Bands, you will have an idea where the price is trending, if its about to go down or up based on TA that uses statistics, trends and averaging.

Yes but what was changing price in 1900 when TA was developed? What was making this price and volume transformations to give data to made TA? What? magic wand?
TA is as you said "based on the numbers" but those numbers are made by price and volume change made by INVESTORS DECISIONS. To buy or not to buy. Price will not move if invesotor wont make decision. And his decision is alwais subjective.

If TA gives sell sygnal price is going down becouse analysis said so and magic wand make it happend or becouse someone made decision to sell? And what made him to do this decission in 1900 when there was no TA?

Investor caused by his emotions make transactions what change price and volumen what gives data to technical analysis. I didnt say that TA is based by someones relationship with his mum.

Chemistry describes love by enzyme flow (especialy testosterone dopamine oxytocin vasopressin). But its still chemistry not lovestry.

Really mate! Then we should call it "emotional analysis" and not technical analysis!

The definition says "Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns".

I don't see any emotional quotient is being used in this type of analysis. Technical analysis is purely based on the numbers and not by the emotions. That is the reason why TA doesn't really help understanding the crypto market which is driven by global emotion.

Introduction - nothing special :
The very first and most obvious statement is that price move up and down when investors are selling and buying. Change in demand and supply have influence on price what push it up or down. It don't magical moves. Every point on chart is point where 1 investor said "this is the lowest point - ill buy" and second investor "this is the highest point it won't go higher - ill sell".

Second obvious statement - to earn on trading other investor have to lose. That's why to earn on market you need to better than he is.

Third obvious statement - it TA works it shows you when money will be pumped by investors into asset. It definitely not work by magic.

Now jump to Technical Analysis:

How TA works then?

TA was made to calculate emotions of average investor (edit: TA was made to calculate next moves of average investor). I mean that we are not special. Most of the investors buy when price goes up and sell when it goes down (mostly). It was calculated into indicators to give you time advantage to show what will average investor do in next time frame to be before him. If you know that average investor who invest by his emotions will sell in next time frame all you need to do is sell before him.

For example, he will sell because price is going down - TA indicator will show it by crossing average.
For example some of the investors won't sell because price was that low few weeks ago and it bounce. But he will sell when price will be lower (break support)

TA gives huge advantage to be before average investor and earn money on their emotions by your calculated method.

Historic:

The principles of technical analysis are derived from hundreds of years of financial market data.[6] Some aspects of technical analysis began to appear in Amsterdam-based merchant Joseph de la Vega's accounts of the Dutch financial markets in the 17th century. In Asia, technical analysis is said to be a method developed by Homma Munehisa during the early 18th century which evolved into the use of candlestick techniques, and is today a technical analysis charting tool.[7][8] In the 1920s and 1930s Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered to be one of the seminal works of the discipline. It is exclusively concerned with trend analysis and chart patterns and remains in use to the present. Early technical analysis was almost exclusively the analysis of charts, because the processing power of computers was not available for the modern degree of statistical analysis. Charles Dow reportedly originated a form of point and figure chart analysis. Wikipedia - https://en.wikipedia.org/wiki/Technical_analysis

Back to Technical Analysis:
As you can see TA indicators was made in 17-18th century. Who was average investor then? Most of them was published to everyone in 1920. Average investor from 1920 didn't have computer and to make transaction he had to go to exchange next day and make offer personally.

Since TA indicators was developed word change dramatically. Average investor is completely different investor.

How does average investor look now compared to 1920 investor:

1- He has computer and can make decision/trade in few seconds than change his mind and make oposit trade. In 1920 you had to go to exchange personally or in 1970+ call your broker to make a transaction.
2- He has access to news few minutes after they appear - in 1920 you had to w8 for newspaper
3- HE IS USING TA because its common knowledge and first think you are facing with when you decide to trade is TA - in 1920 average investor didn't know what TA is
4- Average investor now probably is not a person any more. It is trading bot or IA bot
5- How many daytraders was in 1920 and how long they had to wait for their trade to be made?

6'- Cryptocurrency trader world is changed by arbitrage bots from various exchanges that is short term change charts dramatically (you have lots of buy offer where only few would buy because arbitrage bots are buying to sell on other exchanges).

Conclusion
From logical point of view TA indicators should not work any more. It was made in different world to know what will 1920 investor do in next time frame to do it before him. Now average investor use TA. You will not be better than him using TA too especially if average investor now could be trading bot that will always be faster and better than you. Because he is using the same indicators but he is always on market and makes decision in less than second.

In 21 century the only way to be better than other investors is to be a whale. Yes. He knows that average investor use TA or is a trading bot who use TA.

He knows that if price will bounce from support it will make TA lovers think that its "double bottom" and huge demand will appear. He can help price to bounce from support to dump price after on bigger demand (when whale wants to sell).

He knows that if price will break support it will make TA lovers think that its "price is going to next support" and huge supply will appear. He can help price to break support to buy after on bigger supply (when whale wants to buy).

In this point of view the only method to earn on trading when you are not a whale is to swim with whales. Looking for them on market. Trying to find them in the sea of charts.

I would love to discuss what you guys think about it. How TA worked and if TA works in 21 century. I'll set a poll for that too.