Technical analysis gets dismissed because it’s often presented poorly — overloaded with indicators, patterns named after animals, and promises of precision that don’t exist. Strip away the mysticism, and what’s left is much simpler: technical analysis is about how markets behave when people act.
Used correctly, it doesn’t predict the future. It manages risk in the present.
At its core, technical analysis studies price, volume, and time. Price shows where agreement occurred. Volume shows how much conviction was behind it. Time shows whether that behavior is persisting or changing.
That’s it. Everything else is a derivative.
The most useful technical concept is trend.
Trends reflect persistence. When prices make higher highs and higher lows, buyers are consistently willing to pay more. When they make lower highs and lower lows, sellers dominate. Trends don’t mean something is “good” or “bad.” They show which side has control.
Fighting trends without a plan is one of the fastest ways to lose money.
Support and resistance sound mystical, but they’re just memory.
They form at prices where many participants previously acted. When price returns to those levels, traders remember what happened last time — consciously or not. That memory influences behavior, which influences price.
These levels aren’t precise lines. They’re zones. Expecting surgical accuracy misses the point.
Volume adds context.
Rising prices on strong volume suggest commitment. Rising prices on weak volume suggest fragility. Breakouts without volume often fail because there isn’t enough participation to sustain them.
Volume doesn’t tell you direction. It tells you conviction.
What technical analysis does best is define risk.
Charts help you identify where your thesis is wrong. If price breaks a level that mattered, something changed. You don’t need to know what — you just need to respond.
Technicals are less about entries and more about exits. They help you avoid holding losers too long and overstaying trades that stopped working.
The biggest mistake intermediate traders make is indicator overload.
More signals don’t mean more clarity. They often mean curve-fitting the past and confusing noise for insight. The best technical setups are usually obvious — which is why they work when combined with discipline, not because they’re secret.
Technical analysis makes sense when it’s treated as a decision framework, not a crystal ball. It works best alongside fundamentals, not in opposition to them.
Price is the final vote. Ignoring it entirely is just as dangerous as worshiping it.
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