Tuesday, May 05, 2009

Technical Analysis Doesn't Work

Article from Bloomberg: Stock Charts Fail Forecast Test in Complete S&P Miss discusses about the failure of technical analysis in trading. I would say that the testers have naively backtest the effectiveness of the indicators. Well, if technical analysis is the the magic bullet in stock market, then I guess that we can just have a program do the trading for us and we just need to sit down and watch the money fall down from the sky!

Technical analysis requires years of training in the art of interpretations. One tool doesn't fit all problems. You need to use a combination of indicators to get the best result. A good analogy is the use of a chisel and a hammer. Nobody can produce a work of art without the proper training. It takes lots of practice in controlling your hammering. It takes lots of practice to learn to use the correct chisel size. 

To all wannabe technical analyst, don't expect success to come in easy or early. You will discover that the path is long and hard.


No comments: