I won’t hide that I despise Technical Analysis in its very nature. It’s possibly one of humanity’s oldest scam, up there with religion (in a way, technical analysis is a religion). I’m sure that if I could go back in time to Ancient Greece, I would find people using technical analysis there. “The price of olive oil has broken its 50-days smoothed moving average! It’s time to buy!”
With that being said, not everything about technical analysis is bad. I would almost say I’m happy it exists because it has two distinct advantages. Yes, I just said that technical analysis has its pros. Here they are, presented for you:
1. Technical Analysis tells you which “analyst” to avoid right away
Much like a Powerbalance bracelet or MAGA hat, any serious trace of technical analysis on a website should tell you to avoid that person altogether because if a writer sincerely believes in technical analysis, you can rest assured this writer is a massive moron.
These days, whenever I’m about to read an article, a tweet or whatever it is that I read, I always check the end to see if the guy brought “moving averages,” “RSI,” “candlesticks” or any of that garbage into the picture. If he did, then I can safely toss the article away because someone stupid enough to do that has nothing valuable to say, period.
Technical Analysis is a true time saver. You wouldn’t spend an hour listening to a guy who found a system to beat the roulette; you wouldn’t spend one hour reading something from a guy who really thinks that there’s some kind of magic at play beneath stock prices.
You know, I receive hate mail about my technical analysis almost weekly. Despite all my works toward debunking that piece of crap, it seems that some people desperately want to cling to the idea that imaginary lines, triangles and rectangles can help them become rich, so for this reason, I am going to make this very clear right now:
Technical Analysis is to Finance what Naturopathy is to Medicine
It doesn’t work, it’s random bullshit, it’s based on absolutely nothing but random guesses, half-truth and plain and simple made-up stuff. Understood?
2. Technical Analysis allows you to avoid insider trading charges
But there’s a problem! A SEC investigation would quickly reveal the relationship between you and possibly get you cited on Insider trading charges, i.e. trading with privileged information. So, what do you do? You blame it on the technical analysis of course!
“Y… Yes Mr. SEC, I sold in January right before the crash – BUT that’s because the 20 days moving average crossed the 50 days moving average. Also, you can see the %R spiking here, which indicates a sell-off is about to happen. We can get the confirmation from the %D crossing the %K, which confirms the trend. So no, it definitely wasn’t insider trading. Technical Analysis. I’m a good technical analyst.”
No matter what you do or are trying to do, you can always find a technical indicator, or a combination of technical indicators, that justifies the position you’re trying to take. There are so many of them out there and you can play them in so many ways that you can justify any conclusion you want to arrive at.
I’m always amazed when I’m told “You don’t believe in technical analysis.” To me, believing in technical analysis is like believing in Santa Claus or the Fairy Tooth or something. It’s cute when you’re young, but after a while, it gets creepy as hell.
Don’t be that 20-something kid who still wants to sit on Santa’s lap at the mall.