Discover The Danger Of Technical Analysis

Discover The Danger Of Technical Analysis



Discover The Danger of​ Technical Analysis
Let’s cut to​ the chase…
The biggest and​ most critical danger of​ technical analysis is​ that, after a​ while, it​ starts to​ show you​ exactly what you​ WANT to​ see!
in​ quantitative studies, there is​ a​ phenomenon​ where your​ research starts showing you​ what you​ want to​ see instead of​ what is​ really happening and​ that is​ known as​ Data Mining .​
Data Mining occurs most frequently when there is​ a​ huge benefit to​ you​ if​ the results are showing one way instead of​ another .​
this​ is​ the exact same phenomenon​ in​ technical analysis .​
in​ technical analysis, charts start showing you​ what you​ want to​ see especially when you​ have made a​ mistake and​ needs the stock to​ go one way instead of​ another! Suddenly, the deeper you​ dig into the myriad of​ technical indicators, the more evidence you​ seem to​ find supporting your​ mistake, giving you​ the eerie confidence that your​ mistake is​ going to​ turn out just fine .​
We all remember how that turned out, don’t we?
Technical analysis is​ essentially a​ study of​ the various ways to​ interpret historical price and​ volume action​ in​ order to​ form an​ opinion​ of​ future direction​ .​
Because technical analysis methods have become so complex over the years with literally THOUSANDS of​ technical indicators that have been developed, the average amateur investor can always find ways to​ make a​ chart look the way they want it​ to​ and​ point towards a​ non-existent future direction!
Before anyone here thinks that I​ am against technical analysis, I​ am not .​
in​ fact, my main​ trading system, the Star Trading System is​ a​ technical analysis based option​ trading system that has made me money over and​ over again, year after year .​
So, what really is​ the problem? The problem is​ the misuse of​ technical analysis and​ the misuse of​ incompatible technical indicators! Until you​ really understand​ the formula and​ logic behind every technical indicator, the purpose for​ which each indicator has been developed for​ and​ what other confirming indicators works with each other, you​ will never be able to​ use technical analysis to​ form an​ educated opinion! you​ will continue to​ see only whatever you​ want to​ see .​
Some call it​ Analysis Paralysis, I​ call it​ pure ignorance .​
Sadly, it​ takes years of​ research and​ heaps of​ lost money to​ get technical analysis right and​ it​ will only become harder and​ harder to​ get right with ever more complex and​ new indicators being developed everyday .​
a​ lack of​ knowledge and​ lack of​ time to​ attain​ that knowledge has always been the bane of​ all amateur traders .​
That is​ why following a​ developed and​ proven trading system with a​ proven, proprietary mix of​ indicators is​ the best thing an​ amateur trader can do.
So, the next time you​ look at​ a​ technical analysis chart, remember, are you​ merely looking to​ prove what you​ already have in​ mind? Because if​ you​ are, then you​ are very likely to​ find all the evidences you​ need to​ support your​ own views.




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