"The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings." Julius Caesar (I, ii, 140-141)
Before all the Technical Analysts get roiled up, let me say that I was very careful in picking the Title for this Article. I chose to use "doesn't work" rather than "can't work" for a very specific reason that will become apparent as the article progresses.
I fully expect that this article will draw readers from three different perspectives. There will be those that distrust Technical Analysis looking for more fodder; those that believe in TA ready with "guns a blazing"; and those that have no set opinion looking for direction.
Over the years I've enjoyed many spirited academic discussions with my peers on the merits of TA. As we volley back and forth arguing for or against the premise that TA works, in the end no one changes their outlook as each side declares itself victor. All that is ever accomplished is a "venting".
Well aware of this dynamic, this article isn't designed to refute the merits of TA. I'm not trying to preach to the choir or change believers into non-believers. Quite the contrary. My objective isn't to demonize TA but rather to provide some insight that could actually benefit those utilizing TA indicators as a tool.
Let me start with the most basic of definitions for TA. Lest I be accused of filtering the definition, here's what Investopedia says ...
"What is 'Technical Analysis': Technical analysis is a trading tool employed to evaluate securities and attempt to forecast their future movement by analyzing statistics gathered from trading activity, such as price movement and volume."
Fundamental to this, TAs make extensive use of charts and draw inferences from items such as "bands", "channels", trends and other patterns extracted from the chart.
