Technical analysis is far from useless. As an active trader, it's the best tool I have come across. I'm sorry, but to say that it is useless is to admit pure ignorance, or to admit your failure to grasp the concepts and understand how to apply them visually and correctly.
People do apply techniques incorrectly, yes. They can get confirmation bias from it, yes. However, that does not invalidate successful traders who trade primarily on technicals. Keep in mind that a "tool" is just that - but not used the same way by everyone - and "this means that" isn't a blanket rule that always works as described. Everything is part of a larger structural puzzle. Also, HFT algos will eat your lunch if your hold period is too short. I don't hold a position for more than a week, MAYBE two, but never less than 45 minutes - and as a retail trader, that makes a huge difference in P/L ratios over time.
Through my trading experience I have continuously used less fundamentals and more wonky technical techniques I have come up with. It has given me a massive edge over whoever is on the other side of the trade, and has pulled me quite a long way out of debt and into making a nice living doing it on the side. The side of the story that you don't see in the endless "get rich quick" trading schemes that promise to teach you all of those super awesome secrets is that anyone who knows what they're doing isn't spending any time teaching it to the masses.
But, to get back on topic: Well done with this site! It's a great beginner guide to understand what a lot of the basics actually mean. Babypips falls very short.
If that is the case, it would create a market inefficiency which some other market participant could come along and exploit (anticipate the TAs moves and act preemptively). Your statement is basically saying there is no one out there smart enough to do this.
Not necessarily! Suppose a bunch of noise traders are piling into a stock because all seven green lights are on in the software they bought for 29.95 from an infomercial. Let's take as an assumption that this algorithm has no idea what it's doing. The smart money thing to do would be to buy now (since investors are going to keep buying as they notice their text alerts or sound alarms or whatever tells them to buy the stock) then sell again knowing full well you are driving the price further from fundamentals in the short term. The best response to past irrationality is to trade against it. The best response to future irrationality is to trade with it. That irrational behavior might be forecast-able should not be a huge surprise.
Momentum is a well established empirical regularity in stock prices. Knowing this, you trade with the momentum at then trade against it later. This does not help momentum go away.
What do you think a good portion of HFT algos do? Of course people are exploiting the order flow that comes as a result of generic "signals".
But my point is that technical ANALYSIS is the utilization of TOOLS. People apply tools in different ways. Especially with fibonacci, there is certainly not one way to trade using fibonacci retracements, extensions, time, harmonics, etc.. I know traders who use it completely differently than I do. What matters is how it's applied to a chart and how trading decisions are made based on how the trader interprets what they're seeing.
It sounds like you guys are describing things like MA crosses to be useless. How they're normally applied by new traders is "the red crossed the green, so I sold", then they get mad when they lose money on the trade (and blame technical analysis). Yet, a moving average is a tool which can be tweaked in numerous ways - how you tweak/apply/interpret/trade using that tool is an entirely other question. Nobody in the right mind should be trading using only one tool, or by applying an "out of the box" charting tool then just blindly making decisions based on that.
Liken this to a software context: "Sensitive data can get stolen, so software is BAD". Yet, it's really just how it's written, up/downsides that are inherent of the language it's written in, but mainly HOW it was designed and how businesses utilized or tweaked it. You can't generalize the entire software industry because of security holes.
If you reduce technical analysis to generic "super awesome signal, works every time!" marketing ploys, you'll miss one of the best edges you could possibly have in trading/investing.
Note: This disagreement is a perfect example of why volume exists on each side of the market.
People do apply techniques incorrectly, yes. They can get confirmation bias from it, yes. However, that does not invalidate successful traders who trade primarily on technicals. Keep in mind that a "tool" is just that - but not used the same way by everyone - and "this means that" isn't a blanket rule that always works as described. Everything is part of a larger structural puzzle. Also, HFT algos will eat your lunch if your hold period is too short. I don't hold a position for more than a week, MAYBE two, but never less than 45 minutes - and as a retail trader, that makes a huge difference in P/L ratios over time.
Through my trading experience I have continuously used less fundamentals and more wonky technical techniques I have come up with. It has given me a massive edge over whoever is on the other side of the trade, and has pulled me quite a long way out of debt and into making a nice living doing it on the side. The side of the story that you don't see in the endless "get rich quick" trading schemes that promise to teach you all of those super awesome secrets is that anyone who knows what they're doing isn't spending any time teaching it to the masses.
But, to get back on topic: Well done with this site! It's a great beginner guide to understand what a lot of the basics actually mean. Babypips falls very short.