Why technical analysis is not reliable

[KingsDen]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
 Some of its limitations includes
1.it is based on assumptions about past market trends, gotten from the past market price and  volume data
2.it is a backward tool subject to interpretation from different traders.
3.Technical analysis will not provide the full details of the market,  that is putting economic and global events into consideration,
so traders should put all these factors into consideration before making an investment decisions using technical analysis.

Well, your topic centered on technical analysis. Before now I have read some comparison between technical and fundamental analysis. Later I began to read about psychological analysis. All these tools do not make 100% sense independently, as they need each other in order to make a complete sense. Whoever is an expert on technical analysis should also know a bit of the fundamental analysis and vice versa. When there is a news in the society, you will understand that the chart will start tilting towards the news in the fundamentals. This is also applicable in the order way round. But then, the power of technical analysis should not be overemphasized. The knowledge of the charts and candlesticks is very important in cryptocurrency trading. No matter its limitations, its advantages overwhelms the limitations.

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[South Park]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
 Some of its limitations includes
1.it is based on assumptions about past market trends, gotten from the past market price and  volume data
2.it is a backward tool subject to interpretation from different traders.
3.Technical analysis will not provide the full details of the market,  that is putting economic and global events into consideration,
so traders should put all these factors into consideration before making an investment decisions using technical analysis.

Still TA must not be underrated either, TA is the best tool we have available to predict what the markets may do, and while it is true that TA is based on the past actions of the markets, what else can we use to predict what the market may do other than its past? So while anything can happen, even things that we have never seen before and which could make any prediction useless, at the same time we do not really have any tool that can come close to predict what the market could do with the same accuracy of TA.

[Franctoshi]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
 Some of its limitations includes
1.it is based on assumptions about past market trends, gotten from the past market price and  volume data
2.it is a backward tool subject to interpretation from different traders.
3.Technical analysis will not provide the full details of the market,  that is putting economic and global events into consideration,
so traders should put all these factors into consideration before making an investment decisions using technical analysis.

One major problem with most technical trades is that they tend to rely on their predictions about the market other than supposed reactive , Also never forget that traders emotion plays a key role in determining trend, this is why you experience sometimes a sudden market change in direction, take you for instance, you might decide to buy a market but price reverse, this is where you as a trader suppose to react, so there are couple of reason why we have stop loses. Therefore, as a trader if you want to get the best out of market you must combine both technical analysis and the fundamental analysis, both makes what we call market analysis.

[GreatArkansas]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
(...)

But for me, technical analysis is the nearest way to trade and support your analysis. It's not guaranteed yes, but a lot of professional traders use technical analysis for a living, cryptocurrency or not cryptocurrency technical analysis really exists.
Just think that trading will not give you a 100% guarantee.

[Patrol69]

You cannot be 100% certain by doing technical analysis or any other analysis. Through technical analysis or any other analysis we can only predict that the next movement of the market may go in a certain direction but we are not sure that the market will go in the same direction. Many times it is seen that the market goes in the opposite direction of what we predict by analyzing the technical analysis and the market chart well. Sometimes there is so much bad news in the market that usually our analysis does not work properly. If a candle is four to five times larger than the normal way the candle fluctuates, then the prediction we made will not be correct because the market will suddenly move much higher. So, if you can analyze it correctly, it may match the market changes to some extent, but not completely match your analysis.

[Lanatsa]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
(...)

But for me, technical analysis is the nearest way to trade and support your analysis. It's not guaranteed yes, but a lot of professional traders use technical analysis for a living, cryptocurrency or not cryptocurrency technical analysis really exists.
Just think that trading will not give you a 100% guarantee.

You cant be able to make yourself that be so sure of even if you are using up that fundamentals purely on which it would really be needing that in line with technicals so that at least you are having some idea on whats going on
or possible movements that could really happen. This is way much more better rather than putting up yourself on having some position without any basis and this is something which is not that recommended or ideal.
Its not reliable? How you do say so? Trying out to compare on making up some trades without any basis or analysis. You would really be able to make yourself that find its relevance.

So the question is, how you would really be that making yourself that making up some positioning towards the market without any basis. We do know that it cant really be
that just that too easy on handling yourself on a very speculative market on which it is really that something that do talks about total unpredictable and truly
giving out that random movement.

[stompix]

Still TA must not be underrated either, TA is the best tool we have available to predict what the markets may do, and while it is true that TA is based on the past actions of the markets, what else can we use to predict what the market may do other than its past?

Dice, coins, the color of the first bird to fly by, the side on which you wake up...Since all these actions will at first be random but with time as more data build up for sure you could make TA out of this, I'm pretty sure that there will be people who will make 90% profitable trades in days when it rains!
After all, again, it's past events that you hope to be repeated in the same way!

Anyone saying the technical analysis is not reliable is not an informed trader because it is so reliable to me. Of course, I can't expect 100% success from it, and those traders who could possess a technical strategy with at least 75% winning should have the reliability with management, needless to say, some traders are still getting 95% or more from their technical analysis.

Nope:

In practice, however, day trading is difficult for retail investors to profit from. Brad Barber of the University of California, Davis, did a study in 2010 that found that only 1% of day traders are always making money.The study studied trades from 1992 to 2006, a span of fourteen years. The few people who do make money consistently spend their days trading, and it becomes their full-time job instead of something they do between meetings or at lunch.

1. You are so wrong about this. For it to use the past details to predict the future outcome doesn't mean it's bad, especially when you use the support and resistance strategies, including price action on the higher charts

Fun fact, according to all possible charts, a negative value for oil was impossible to predict, because there wasn't any tool or method that would be able to take into account negative values, yet...it happened!  and the only ones that did predict it did it because of market conditions, not because of charts or indicators as there was none which would have been of use!

[Hypnosis00]

You may disagree that TA is useful in trading but have to think this - better trade having some basis and guide rather than doing like you are asking for luck and don't have any idea if this is a right or wrong call. It may be not useful on your end OP but do you think why the majority are using this tool? It only just means that traders consider this as a helping tool to decide when to sell and when to buy. Indeed, it was just an assumption because we never know what is coming but at least, with the use of Technical analysis, our decision is clear and at least have some assurance.

[Queentoshi]

2.it is a backward tool subject to interpretation from different traders.

There are so many indicators, and some are easy to understand that almost every trader knows them and understands them. It is the more complicated indicators that are subject to different interpretations from different traders, and those are the ones to avoid. keeping things simple can be the best way to get results. With a good understanding of the simple indicators that every trader understands, chances of becoming profitable increases.

[RockBell]

You cannot be 100% certain by doing technical analysis or any other analysis. Through technical analysis or any other analysis we can only predict that the next movement of the market may go in a certain direction but we are not sure that the market will go in the same direction. Many times it is seen that the market goes in the opposite direction of what we predict by analyzing the technical analysis and the market chart well. Sometimes there is so much bad news in the market that usually our analysis does not work properly. If a candle is four to five times larger than the normal way the candle fluctuates, then the prediction we made will not be correct because the market will suddenly move much higher. So, if you can analyze it correctly, it may match the market changes to some extent, but not completely match your analysis.

Since nothing is 100% accurate, the only thing you can do if analysis doesn't work most of the time is try again later. We are all aware of the risks involved before we enter the trading world. Risk of perhaps losing your money. The market's movement can fluctuate because it occasionally reacts to news, which might alter the candles' entire structure and make predictions less successful. Traders also lose money as a result.

Furthermore, the analysis is meant to assist you stay on course and relieve you of the burden of making judgments because the market is never constant. People often struggle to decide what action to take, therefore one requirement for becoming a trader is being able to read the market and perform analysis. Only then can someone be referred to as a trader.

[ancafe]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
 Some of its limitations includes

Technical analysis is only as a complement part of various strategies because accuracy cannot be seen in a much greater percentage. Technical analysis is sometimes needed but not as a test of the overall process in trading because it is more to the statistical assumptions. A trader will use many indicators to start trading and usually they will use the most appropriate to decide when trading. Need the ability to undergo trading and not to mention talking about the control of the risk management.

That's why people consider trade too difficult for beginners because of the many considerations they need to decide. Even for a class of people who are experienced in trading also sometimes it will be difficult to determine the direction of trading when taking profit and stop loss because the market changes so fast.

[gunhell16]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
 Some of its limitations includes
1.it is based on assumptions about past market trends, gotten from the past market price and  volume data
2.it is a backward tool subject to interpretation from different traders.
3.Technical analysis will not provide the full details of the market,  that is putting economic and global events into consideration,
so traders should put all these factors into consideration before making an investment decisions using technical analysis.

My question to you is: is technical analysis not helpful to other traders? Now, if technical analysis is not reliable, shouldn't other traders stop using it? Is that right?

Let's just assume that technical analysis is not really reliable. What method should a trader use or do to get profit from trading on any exchange platform if we don't
do technical analysis anymore? Please answer OP so that we can be enlightened here on this forum platform.

[moneystery]

the weakness of technical analysis is that when the market is under pressure, for example when an american official says that they will raise interest rates higher, this will affect the market directly and no matter how hard you do technical analysis it will not work. so as traders, we should not only rely on technical analysis, because at any time the market will change, we must also be able to see news and rumors on the market, so that will be able to help us determine more profitable positions and prevent serious losses.

[Mahanton]

the weakness of technical analysis is that when the market is under pressure, for example when an american official says that they will raise interest rates higher, this will affect the market directly and no matter how hard you do technical analysis it will not work. so as traders, we should not only rely on technical analysis, because at any time the market will change, we must also be able to see news and rumors on the market, so that will be able to help us determine more profitable positions and prevent serious losses.

The main situation that could mess up technical analysis is on the time that there would really be some sudden news or simply with those fundamentals on which it would really be something that would make tons of traders would really be liquidated specially to those who do make out some future positions on which we know that one red candle wick or green could really lead into those traders to burn out their capital or their positions.
This is why its not really not reliable but there are really moments or conditions on which could mess up technical analysis but we do know that not all the time this market would really be having those news.

It would really just that matter on a certain individual whether they would really be that focusing too much into those TA. Although this is much more better rather than
on making yourself having those random approach or positioning without any basis and this is something not that recommended once you hovered yourself into this market.
You would really be needing that educated approach on dealing up with volatile prices. It might not guaranteed but at least you are going in the right path.

[Hyphen(-)]

Technical analyses are not always perfect; they are assumptions made by trading experts based on experience and some tools they are using to make predictions, which are usually based on facts, and sometimes they are true but not reliable.

Some of its limitations includes
1.it is based on assumptions about past market trends, gotten from the past market price and  volume data
2.it is a backward tool subject to interpretation from different traders.
3.Technical analysis will not provide the full details of the market,  that is putting economic and global events into consideration,
so traders should put all these factors into consideration before making an investment decisions using technical analysis.

Aside from all these limitations, everyone that wanted to start trading should have learn so many things about trading which I believe after learning should be able to understand how risky crypto trading is. People with less knowledge and experience are always trying to blame technical analysis that we all know are not perfect and are not reliable because of how volatile market is.
Trading is risky, always avoid copying what others are doing if you don’t understand to avoid losing money easily.

[jrrsparkles]

Nobody can predict future that is why we get wrong predictions no matter how accurate we calculate for our trading. But for a day trader there is no other tool than rely on technical analysis and hope that this time their prediction will work and continue with that hope everytime.

If you feel you are not making profits then try changing your strategize and use different indicators but the fact is technical analysis is just a prediction not an assurance.

[AakZaki]

I laughed seeing you make this thread, then what am I doing with technical analysis if it can't be relied on.
I've been studying technical and fundamental analysis for several years, but you said that it can't be relied on. It seems that you can't master it until you get frustrated and say that technical analysis is ridiculous and doesn't provide complete market details. Of course there are several combinations that are carried out because technical analysis will only predict the market based on existing data and seeing how the charts work.

[milewilda]

I laughed seeing you make this thread, then what am I doing with technical analysis if it can't be relied on.
I've been studying technical and fundamental analysis for several years, but you said that it can't be relied on. It seems that you can't master it until you get frustrated and say that technical analysis is ridiculous and doesn't provide complete market details. Of course there are several combinations that are carried out because technical analysis will only predict the market based on existing data and seeing how the charts work.

Haha you got it right! People would really be making out those kind of sentiments basing up into the emotions and mindset that they do have specially on the time that they have failed on doing trading
and this time via making use of technicals and with too much failure and loses then they do really came up with this kind of idea that it doesnt really work and its not something that you could really be able to rely on
without even trying out to realize that these tools are the main ones being used by most traders. You cant really be able to read up a chart without having these indicators on which you cant really be able to make use of price actions anytime. This is why it would really be that normal that traders would really be making use of these indicators.

Naked trading could be considered to those people who are already that professional but still we would really be needing up to make use of these tools so that it could make out that reading up possible
entries and exits which we do know that it would really be relevant or something important. Also, not all the time this market would really be having news or major events on which
you could really be able to watch for.

[Bushdark]

Tge technical analysis could be a reliable means to trade the forex market but not in the crypto market since we have different projects that the movement is not dependent on the market chart but rather on pump and dump. This happens in every cryptocurrency projects so we must be ready for the heart attack if we are truly a technical trader in the crypto space. Things mostly move the market without any technical analysis. It is information and hype that controls the market we need to be prepared for it.

[o48o]

technical analysis is a useful tool for traders, but we have to consider it's limitations. Technical analysis is basically based on assumption about the past market statistics and data, without putting into consideration other external factors . So traders should not 100 percent rely on technical analysis, they should use it together with other methods of analysis.
 Some of its limitations includes
1.it is based on assumptions about past market trends, gotten from the past market price and  volume data
2.it is a backward tool subject to interpretation from different traders.
3.Technical analysis will not provide the full details of the market,  that is putting economic and global events into consideration,
so traders should put all these factors into consideration before making an investment decisions using technical analysis.

First of all, external market data can be used for technical analysis. People are constantly using them as data points and consider if some rumors for example have already priced in. Or if they will cause a perfect storm and trigger bots and traders to complete some patterns in the chart. And obviously sell the news is something people are waiting of if they know the date when rumor might get official press release.

And no trader trusts TA 100 percent certainty pecause accuracy of any TA, no matter what indicators they use is FAR from 100%. Percentage accuracies of it are really hard to measure because different time frames, different markets, different indicators can work very differently. It's far from exact science and i totally get why some people don't trust TA at all.

But imho we can't really judge TA as whole field of it consists of a huge spectrum of different techniques. Different traders don't trust different indicators or patterns. And some of them are laughing at meme lines, while they swear by elliot wave. And some are laughing trend lines calling them meme lines, and are perfectly fine using ichimoku cloud or combinantion of indicators and patters themselves, even if they would have so many settings and variables to look for that it would be impossible to measure any kind of accuracy for it.

And basically anyone can create an indicator. So if my indicator of solar eclipse cycles vs wick lenghts or something like it doesn't work, does that mean TA in general isn't accurate?

Personally i don't even care. I gave up complex indicators long ago as i can't calculate any probability for them. And i am using combination of "feeling" of the markets that comes with experience and combining them with most common patterns that i know people will be reacting to. And mostly looking at the big picture of the chart.