Please convince me that technical analysis works

["D"]

if technical analysis "doesn't work", is there something else that does? And what do we even mean by "doesn't work"?

A simple example, not actual numbers;

I look at the amount of time I put into researching the markets, time in front of the charts, and ultimately return on investment. If the S&P 500 is returning 10% for example, and my trading is returning 8% then I am not successful. I may be profitable, but not successful by my standard. I can invest in the S&P making more money with no effort.

And I need enough return to be compensated for my time. Am I more profitable committing my time to another activity? That is passively investing in the S&P at 10% while generating other income with my time. Quality of life plays a part as well. I don’t like sitting in front of the charts all day. Others may have different criteria to fit their purpose.

What I find successful is a combination of fundamentals and technicals. Fundamentals provide valuable information on what to trade, why and in what direction, or if you should trade at all. Once my trading decisions have been made, then I turn to technicals which are valuable in the management of the trade. Technicals are used to determine entries, exits, targets and so on. Technicals are not used to make the decision to trade.

 

["D"]

What are fundamentals? Let’s look at the derivation. Derivations of a word sometimes present a clearer understanding.

From Latin fundamentum “foundation”. Fundamentals defined from the 1630’s, ”primary principles or rules”

The basics or foundations of any field of study rarely change even as technology rapidly advances.

Why is this important? To be successful in any endeavor in life the foundations of that endeavor must be in place, with the primary principles and rules being adhered to. Otherwise failure predictably results.

 

[FX4Newbies]

What are fundamentals? Let’s look at the derivation. Derivations of a word sometimes present a clearer understanding.

From Latin fundamentum “foundation”. Fundamentals defined from the 1630’s, ”primary principles or rules”

The basics or foundations of any field of study rarely change even as technology rapidly advances.

Why is this important? To be successful in any endeavor in life the foundations of that endeavor must be in place, with the primary principles and rules being adhered to. Otherwise failure predictably results.

Hi "D",

Yes... fundamentals are important and the ultimate basis for the overall direction in which the price moves, but as I think about it, I believe it has value for all trading styles, but more so for long-term trading. Also, certain markets depend more heavily on Fundamentals, like stocks for example...even commodities. FX seems to be more technically traded. Also, trading styles and timeframes selected can make a difference.

I do look at Fundamentals, maybe not as in-depth as some. Then again, there are traders who pay no attention, because in their minds the fundamental data releases might not even be accurately presented.

May I ask what is your style of trading? Which timeframes do you trade?

 

[FX4Newbies]

A simple example, not actual numbers;

I look at the amount of time I put into researching the markets, time in front of the charts, and ultimately return on investment. If the S&P 500 is returning 10% for example, and my trading is returning 8% then I am not successful. I may be profitable, but not successful by my standard. I can invest in the S&P making more money with no effort.

And I need enough return to be compensated for my time. Am I more profitable committing my time to another activity? That is passively investing in the S&P at 10% while generating other income with my time. Quality of life plays a part as well. I don’t like sitting in front of the charts all day. Others may have different criteria to fit their purpose.

What I find successful is a combination of fundamentals and technicals. Fundamentals provide valuable information on what to trade, why and in what direction, or if you should trade at all. Once my trading decisions have been made, then I turn to technicals which are valuable in the management of the trade. Technicals are used to determine entries, exits, targets and so on. Technicals are not used to make the decision to trade.

"What I find successful is a combination of fundamentals and technicals. Fundamentals provide valuable information on what to trade, why and in what direction, or if you should trade at all. Once my trading decisions have been made, then I turn to technicals which are valuable in the management of the trade. Technicals are used to determine entries, exits, targets and so on. Technicals are not used to make the decision to trade."

Agreed! I also like your assessment of value and time etc.

 

[FX4Newbies]

Another question popped into my mind...if we found a perfect system, 100% winners, do you think the average trader would be able to execute it flawlessly all the time? Not talking about using robots here...