How often do we hear one person ask another, “So what are the charts telling you?”, or “What does that chart say?”. Think about that. Charts don’t actually say anything at all. They’re charts. Charts don’t speak. So why do so many people want to know what the charts are saying?
Technical analysis is the study of the behavior of the market and market participants. The most important tool that we have as technicians is price. Movements in the price of an asset represent the changes in equilibrium between supply and demand. It just so happens that the best way to visualize these changes in equilibrium is in chart form. This is why many technicians prefer to be chartists. It is not necessary for a technician to use a chart, as in the quantitative field for example, but more often than not technical analysis is best practiced using charts, for this one simple reason.
In most cases, it’s not that technical analysis doesn’t work. It’s just that you’re not very good at it. Do you really think you can just go read a book and then start swinging around millions of dollars and succeed? Can you read a science book and then go and perform surgery? Can you read a book about baseball and go hit a home run off a pitcher in the big leagues? No, No and No. To think otherwise is simply ignorant and more importantly, irresponsible.
The process of making money consistently in the market, and more importantly keeping what you have along the way, is something that takes a long time. There are lessons learned the hard way, and some learned the easy way by watching others. Biotechnology is a good example. How many time have we woken up to find out a particular biotech is down 50 or 60% over night? By the time the market opens, it’s too late. This is one lesson that I’ve learned the easy way. I was told by my elders early in my career not to get sucked into those little 1 drug biotechs because although they can potentially be a home run, more often than not they’re simply the opposite. Those things can be widow-makers.
On the other hand, there are plenty of lessons that I’ve had to learn on my own the hard way, like staying away from stocks near flat 200 day moving averages. I can’t tell you how long it took me to finally learn that one. Trust me, if you’re reading this, stay away from those. It’s not worth the aggravation. You’ll thank me when you’re older!
My point here is that Chart don’t say anything. They don’t speak to us or tell us how to trade and make money. They are simply a visualization tool. Do you want to know the history of the changes in equilibrium between supply and demand of a specific asset, or two relative to one another? Pull up a chart. That’s all they’re good for.
Now, what you do with that data and how you use it to your advantage is a whole ‘nother story. If you want to follow along with me and go day by day, week by week with my process, feel free to sign up for a 30-Day Risk Free Trial to Allstarcharts.com. You have nothing to lose and this will certainly give you a better idea as to how I approach the global marketplace. This can help you develop your own personal strategy. We’re all different. I’ve taken ideas from my predecessors and colleagues and my process will always be evolving.
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