Does Technical Analysis Work?
(Read more about me click here)
Is Technical analysis Real
Yes technical analysis is real and used widely by traders, investors and financial institutions.
Used in the financial markets such as the Forex market, Crypto market and Stock Market. I even know a very successful bond trader that uses indicators along with other technical analysis to trade successfully in the fixed income markets.
It is a hotly debated topic whether it works or is some kind of gimmick.
In this article I cover what it’s all about.
Does Technical Analysis Really Work?
In short, yes, it does. If you use it correctly and understand what works and why, it works incredibly well.
I intend to explain all about that through-out this article.
Over the years I’ve proved it works trading the Forex market, and due to positive performance was invited to trade with a Hedge Fund in 2022.
I have helped Able community members (beginners) change career and go on to trade full-time trading the Forex market.
This is trading the Able Method which includes technical analysis. The Able Method is available to learn click here
For the Able Trading community, using technical analysis has hugely reduced discretion & clarifies the process, making it easier to trade the Forex market.
There are many myths and opinions surrounding this type of analysis and Forex trading.
For example, here at Able Trading we use price charts and indicators, such as moving averages, the MACD and RSI Indicator.
They are common place in trading the financial markets and used by professional traders.
We do not rely on ‘patterns’ or use ‘Elliot wave’ for reasons I will cover later.
The common misunderstanding is that trading with indicators are to indicate a trade.
That is simply incorrect and an assumption that because of the name ‘indicator’ that’s it’s purpose should indicate a trade.
Those that rely on that approach to trade the Forex market will likely find out the hard way.
In my opinion, trading using technical analysis is price action relative to indictors to identify a probabilistic occurrence.
This aids me and my members in many ways to obtain our winning edge which I will go into.
What is Technical Analysis?
Technical analysis is the method of using price charts and technical trading indicators for example, simple moving averages, RSI Indicator, MACD and Bollinger bands that will aid the trader in making a decision on directional bias, probability of occurrence, price targets and risk management.
That is how we use it, here at Able Trading.
Technical analysis is used by investment bank analysts, Hedge funds, swing traders, day traders & scalpers.
A $24,000 a year subscription to a Bloomberg terminal has indicators for a reason.
Professionals use them.
How Does Technical Analysis Work?
Technical analysis is a wide and varied methodology.
It is essentially used to increase the traders probability of identifying a price move from one level to another with the intention of increasing the odds of being correct. Therefore the trader is able to capitalise on the move by trading it in the underlying market.
Trading the financial markets successfully is using the tools that work for you. Not all the tools available to the trader.
Does technical analysis work? Firstly, you have to understand the rules of the trading game, which is simple in theory.
The trader must obtain an increased probability of being able to identify price moves and then monetize it consistently enough to make a profit.
If you understand what a traders job is, it is going to be much easier to understand why you do what you do.
Does technical analysis work? You bet it does. But this will be shouted down by naysayers.
As an FX trader I’m open minded to what analysis contributes towards that winning edge. What there is a lot of online is opinions with no data…
Does Technical Analysis Work? 100% Yes and I Can Back it Up With Data.
Pure price action educators always say indicators do not work are lagging and they are messy. Lets look at pure price action quickly? Now you know the rules of the game, as described above can you now see why pure price action would be at a huge disadvantage?
Ask a pure price action does technical analysis work they will dismiss indicators and rely on price and trendlines only. An extremely low amount of information to increase odds consistently. It’s no wonder 100% of my members who tried pure price action couldn’t make it work yet 2 of those that came to Able Trading went full time. That speaks for itself…
If you look at their service and look at the proof they offer you, that will tell you how certain they are their system works.
The way we trade in the Able Trading community works in almost all markets and can withstand any market environment and continues to deliver year after year.
When I was learning to trade in the Forex market I was most likely just like you seeking a solution.
The Able Method is a much more refined process now after developing it over the years which makes it beginner friendly.
Myself and the Able community use indicators and price to confirm conditions & confluence.
Why We Do Not Rely on Patterns or Use Elliot Wave
Trading is about increasing your odds and the probability of being right more than you are wrong.
Most importantly monetizing that occurrence without taking to much risk on a consistent basis.
When trading for many years you get to understand how the markets work.
I do not mean from a technical point or fundamental point.
But from the psychology and sentiment side of trading, the crowd dynamic and how smart money moves the market.
If the market knows a of a pattern that retail traders like it will be exploited. Heard of stop hunting? Yes It’s real.
Relying on a pattern is just to loose an approach, and lacks conviction for me personally. If it works for you, great.
You’ve probably seen these posters of candle sticks and patterns that are common in online social posts with new traders. That in itself is a contrarian indicator to show that 90% are seeking to rely on patterns and around 80-90% fail. It is very telling.
Follow the herd get slaughtered.
Elliot wave is very popular. Again, each to their own. It is relying on a pattern to an extent.
Chart patterns and Elliot are relying on a forecast with a wide variable. Therefore, the accuracy is hindered on a risk basis with is no real confirmation other than history. Because of this the The confidence just isn’t there for me and trading is a confidence game.
With our approach in the Able Trading community we confirm conditions and compound the probability step by step. The margin for error is kept small and the variables are tight.
Because of this we can trade with confidence.
How Do We Use Technical Analysis In the Able Trading Community?
Given we are looking at Forex chart to aid us in our decision making, indicators and technical analysis help make that an easier task.
With a visual aid to confirm a condition it reduces discretion. For example look at AUDUSD in the below Forex chart.
Did the price candle breach and/or pierce the Bollinger band. Yes or no?
You can clearly see that it did. Yes it did pierce and breach the Bollinger band!
This condition removes discretion from you in this part of the trading process.
Because of this you are confident in making that decision.
It is vitally important for a Forex trader to be able to objectively follow a process.
Fewer decisions means reduced stress and increased confidence.
Technical analysis aids that plan following process with confirmation on clear non-discretionary conditions.
In turn that means the statistical-winning-edge can be delivered from the executed accuracy of the trading strategy and process.
The way we approach the markets at Able Trading is to compound the probability.
We do this by using multiple, clear conditions and confirmations similar to the AUDUSD chart example above.
Through a series of market conditions, and following a proven process it keeps the technical analysis checklist style.
Used along with our trading mantra of Observe, Confirm and act, which leads us to a conclusion where we can place a limit order or trade at market.
The Able Method and the technical analysis we implement, simply confirms when we should and shouldn’t trade.
That removes a huge amount of the discretion and aids us in sticking to the process that delivers that statistical edge and derive positive returns.
So in summary, does technical analysis work?
Yes it absolutely does – Become One of The Able!