Reading Assignment: Reading Assignment: Does Technical Analysis Work?

#1

Time for the first reading assignment of this course. This is an interesting one, especially if you are new to technical analysis. Read this blog post (https://medium.com/@cryptocreddy/does-technical-analysis-work-fa90413a8328) and answer the following questions in this forum thread.

  1. How does the writer define technical analysis?
  2. What are technical analysts looking to identify in the market?
  3. How would you summarize the authors argument that technical analysis works?
#2

I like Cred and his TA videos are good too…

1.TA is defined as a risk management tool used to identify higher probability, actionable and risk defined (entry/exit targets and R) trades

  1. TA analysts are looking to identify an edge to make higher probability trades with risk management.

  2. The article was good and Cred’s videos on TA are good too. TA works… it takes understanding, continuous study, patience and risk management to be profitable. TA is not a price prediction or market prediction crystal ball, it is a tool set used by traders to build a set of rules (market edge) used to identify higher probability trade setups along with risk management.

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#3
  1. Technical analysis is a risk management tool that can be used to derive probabilistic, actionable, and risk-defined trading setups on an instrument

  2. identify a strategic edge with increasing the probability of success whilst managing the risk.

  3. TA - G00D.
    TA - N0T price prediction but to give a market edge to reach own set goals.
    TA - is higher probability trades along with better risk management.

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#4
  1. How does the writer define technical analysis?
    " technical analysis is the practice of analysing the price history of an instrument in order to make actionable, risk-defined forecasts of its future price ."

  2. What are technical analysts looking to identify in the market?
    Probability of bullish or bearish movement

  3. How would you summarize the authors argument that technical analysis works?
    It’s about personal risk management not you vs profession investors.

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#5

How does the writer define technical analysis?

Technical analysis is the practice of analysing the price history of an instrument in order to make actionable, risk-defined forecasts of its future price.

What are technical analysts looking to identify in the market?

Technical traders, are looking for better odds and for their setups to render them profitable over enough trades.

How would you summarise the authors argument that technical analysis works?

By not asking whether technical analysis can predict the future but rather if they are able to identify and execute a trade setup offering asymmetric Risk vs. Reward.

Technical analysis works because the requirements it has to meet for that to be true are not unreasonably high. It doesn’t have to predict the future, nor must it outperform better equipped professionals. As long as it helps traders identify and trade asymmetric risk:reward trade setups, then it works.

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#6
  1. How does the writer define technical analysis? Technical analysis is a risk management tool that can be used to derive probabilistic, actionable, and risk-defined trading setups on an instrument.

  2. What are technical analysts looking to identify in the market? Asymmetric risk/reward trade setups

  3. How would you summarize the authors argument that technical analysis works? Technical analysis works because the requirements it has to meet for that to be true aren’t to predict the future or that it must outperform better-equipped professionals. As long as it helps traders identify and trade asymmetric risk/reward trade setups, then it works.

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#7

How does the writer define technical analysis?

The writer sums up technical analysis as a tool used to manage and mitigate risks associated with investing on a given instrument.

What are technical analysts looking to identify in the market?

They are looking at maximising their odds of predicting a profitable situation for them.

How would you summarise the authors argument that technical analysis works?

The author puts greats emphasis on the fact that technical analysis works only if you are willing to be a dedicated practitioner.

Not all technical analysis is equal — it’s much more likely to work for someone who takes it seriously (disciplined, systematic, etc.) than someone who just takes a punt

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#8

How does the writer define technical analysis?
Ans: Technical analysis is the practice of analysing the price history of an instrument in order to make actionable, risk-defined forecasts of its future price.

What are technical analysts looking to identify in the market?
Ans: TA is done to find conditions which will maximize the profit for technical analysts.

How would you summarise the authors argument that technical analysis works?
Ans: Technical analysis ‘works’ because the requirements it has to meet for that to be true are not unreasonably high. It doesn’t have to predict the future, nor must it outperform better-equipped professionals. As long as it helps traders identify and trade asymmetric risk:reward trade setups, then it works.

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#9

„Professionals are using ta“ has no real meaning; it is just a way of refering to itself like „they are doing it so it must be ok“

„Is it really fair to blame technical trading as a whole if an individual lacks the discipline to apply it properly?“
Yes, because it is technically impossible to apply it „properly“, because of its vague nature…… and the more concrete you want it to become the less it is going to “work”.

ta is a concept to make you beleave that you are not gambling but when in fact you are acutally gambling;

gambling; ta is a way of gambling in a disciplined and systematic Fashion; ta is some kind of „hard work“ gambling

Claiming that ta works is saying „sometimes I win“ while in the same time leaving out the „sometimes I lose“ part

Without fundamental analysis of an asset the technical analysis has no justificaiton.

#10
  1. “Technical analysis is a risk management tool that can be used to derive probabilistic, actionable, and risk-defined trading setups on an instrument”

  2. Finding +EV positions based on math (including having a movenment, target, stop loss, and a percentage of these things happening)

  3. TA works by finding +EV spots and leveraging your bankroll in a controlled manner. Even professional traders use TA, especially in there bots.

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#11

I don’t agree with that. TA is as much gambling as FA is. The FA can change just as quickly as TA by events that is outside of our control.

The “sometimes I win, sometimes I lose” statement of yours is not accurate. I have said throughout this course that TA is building probabilistic models. That means exactly that, sometimes you win sometimes you lose. It’s about finding models that have higher chances of win than lose. But no trader does only winning trades, that’s a ridiculous idea regardless of which analysis you make.

#12
  1. The writer argues that technical analysis is not about analysing price history to gain knowledge of the future price. It is instead a probabilistic risk management tool that can not only convert price forecasts into actionable trades but helps to generate new ideas as well.

  2. Technical Analysts are looking for better odds and for their trade setups to render them profitable over enough trades. The “trade setup” is identified and executed and it must offer an asymmetric RISK : REWARD (which essentially means that the reward is greater than the risk taken).

  3. The following statements justify the credibility of Technical Analysis working:
    - The requirements that technical analysis has to meet for it to work are not unreasonably high
    - It doesn’t have to predict the future, nor does it have outperform the professionals
    - As mentioned above, so long as the reward is greater than the risk taken then TA is considered to
    have worked.

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#13
  • How does the writer define technical analysis?

TA is a risk management tool that allows to make actionable risk aware trade decisions (aka setups) based on the price history and forecasts

  • What are technical analysts looking to identify in the market?

Trade setups with assymetric risk/reward conditions.
Also, ones that would meet a trader’s “goal” and “stop loss” goals.

  • How would you summarize the authors argument that technical analysis works?
  1. TA is not supposed to compete with professional firms or other individuals. But it’s rather a technique to help the trader meet his own goals.
  2. TA is probablistic, not exact
  3. TA not only helps to mathematically predict the prices but it also gives some insights on the risks and helps to make the decisions about actions.
    Not jsut “what the price will be like” but also “what the trader should do about it”.
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#14
  1. The author defines technical analysis as a risk management tool that is probabilistic in nature. Data is used to make trades based on forecasts. It is not simply knowing what the future price may be.

  2. TAs are looking for asymmetric risk/reward setups

  3. It is much likely to work if there is a system in place and if it is done properly. It has been compared to gambling in a sense that people throw money at charts without reading them properly. Many retail and pro traders successfullly undertake TA.

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#15
  1. “technical analysis is a probabilistic risk management tool that can i) generate new trade ideas ii) convert price forecasts into actionable trades”

  2. Identify trading opportunities that maximize the profit while maintaining a level of risk they are willing to take

  3. TA does not predict the future. Taking the definition given above, it works

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#16

“Technical analysis is a risk management tool that can be used to derive probabilistic, actionable, and risk-defined trade setups on an instrument”. It is not a future price prediction. It is a tool to identify risk/reward trade set ups whereby the individual can create entry and exit points on a given value. The author believes that a disciplined approach to utilizing tools in technical analysis rather than a one time ‘punt’ will lead to appropriate decisions in risk management. The individual need not ‘compete’ against firms with far better equipment and education but simply set up
parameters using TA as a guide and where appropriate ,fundamental analysis as a complementary tool.

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#17
  1. Technical analysis is the practice of analysing the price history of an instrument in order to make actionable, risk-defined forecasts of its future price. Technical analysis IS a risk management tool that can be used to derive probabilistic, actionable, and risk-defined trade setups on an instrument

Summary: Technical analysis is a probabilistic risk management tool that can i) generate new trade ideas ii) convert price forecasts into actionable trades.

  1. Trends and price inflection points (Bear and Bull Markets) => the trend ist your friend. Analysts looking for identify and execute a trade setup offering asymmetric Risk:Reward

  2. technical analysis ‘works’ because the requirements it has to meet for that to be true are not unreasonably high. As long as it helps traders identify and trade asymmetric risk:reward trade setups, then it works. TA are good to identify the short term momentum, for the long term, fundamental analysis are better. Summary: TA is a complementary tool for fundamental analysis

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