Trading

Brasco

Part III - T.A. Doesn't Work

No News is Good News
You have probably seen or heard the technical chart technicians being paraded on TV or business news networks. In my opinion, listening to any pundit on TV is probably the worst thing you can do as a trader, especially whilst trading. When I first started out, I used to have BNN on in the background. I thought I was so smart and so cool to have loads of trading screens with all different charts and business news in the background. In that very moment I knew I had made it as a day a trader. If anybody saw me, they would think I was the big man, coaxing every dollar out of the market from dawn until dusk. If only I actually knew how to trade back then instead of just pretending it may have worked out great!

With enough exposure, the constant jawboning of technical analysts predicting what will happen to a market or a stock starts to get under your skin. I have been holding gold since 2010 because many analysts said it was going to $10k per ounce by the end of this decade. Well, it’s 2019 and I am still holding. In all likelihood, that price will never be seen in my lifetime.

In hindsight, the analysts that were predicting $10k gold by 2020 were all ‘goldbugs’. They had a vested interest that gold would be going higher. And that is the problem. You are listening to somebody else’s technical opinion that suits them, but there was very likely an equal and opposite analyst that predicted gold would sink below $1k by 2020.

A big deal is made about the analyst who predicted a market crash. He/she gets a reasonable amount of airtime because guess what, they predicted the future! What the TV program doesn’t tell you is that this so-called analyst has a monthly newsletter to subscribers, where he/she has been saying a crash is imminent for the past 8 years.

I have many real-life examples of newsletters that predicted the future and told me what junior mining stocks I should buy, or what 3x inverse ETF I should buy or what the next hot penny stock was. All based on technical analysis of course, but all the newsletter providers had a vested interest in everything they were suggesting buying or selling.

STATEMENT

CFTC Rules 4.41 - brascotrading.com  / It should be assumed that these results are hypothetical and simulated. Hypothetical or Simulated performance results have certain limitations, unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

All Content and Information including the Trading Room is provided for educational purposes only. Brasco Trading is not an investment advisory service, broker-dealer, commodity trading advisor, legal advisor, tax advisor, or registered investment advisor, and does not purport to tell or suggest which commodities, currencies or securities customers should buy or sell for themselves. The owner, affiliates, employees or officers of Brasco Trading (brascotrading.com) may hold positions in the commodities, currencies or securities discussed in the Trading Room or website.


Brasco Trading's full legal disclaimer, risk disclosure and privacy statement can be found here by following the appropriate links at the bottom of this page.

You are here

If I told you that technical analysis doesn’t work, what would you say? Would you be gasping for air, clinging on to the nearest stable object, offended that I could state such a thing? What if I said that technical analysis works sometimes, but the other times you must rely on the-reading of tea leaves? Either way, opinions are sharply divided.

 “Technical Analysis” broadly speaking is described like this;

“financial analysis that uses patterns in market data to identify trends and make predictions.”


Fundamental Analysis vs. Technical Analysis
Adding the word “analysis” to the word “technical” is a clever way to give something more credibility than it perhaps deserves. Do not let me confuse you here, technical analysis and fundamental analysis are very different.


Fundamental analysis attempts to measure a security's intrinsic value by examining related economic and financial factors, which can be both qualitative and quantitative in nature. Fundamental analysts’ study anything that can affect the security's value, including macroeconomic factors (e.g., economy and industry conditions) and microeconomic factors (e.g., financial conditions and company management). The end goal of fundamental analysis is to produce a quantitative value that an investor can compare with a security's current price, thus indicating whether the security is undervalued or overvalued.

The key word in the above paragraph is value. Value is an extremely important piece of the trading puzzle that many traders overlook. This will be discussed further in a later web series. In the meantime, if fundamental analysis uses factors both qualitative and quantitative in nature to determine value, what does technical analysis use? Simple. The past.

Part III - Index