I was wondering what the prevailing view of technical analysis is these days. Quaint tealeaf reading from the past or method with some merit? Is its use in decline or does it still have a growing audience?
In my opinion almost any strict rules-based approach to technical analysis (i.e. systems with defined rules that must be followed based on patterns or indicators) is destined to fail.
The same traditional patterns (triangles, head & shoulders, double tops, etc.) in different contexts will produce different results. The same traditional indicators (stoch, RSI, PSAR, etc.) in different contexts will produce different results. This is where discretionary trading adds the most value-- the ability to discern the different contexts and respond appropriately.
So I believe there is merit, but not without the corresponding experience necessary to successfully use it.
technical analysis is worthless. a trading system based on elements of tehnical analysis which has worked since the begining of stock exchange is an asset. there could be a another usage: elements of TA and fundamentals .
It is the study that tries to get the possibilities in the favor of the trader. As any other method, study, science, belief, it cannot be 100% correct. The fact that it requires money and risk management in order to be employed in a trade this means that it is in the side of the trader and not in the site of anyone else.
This study is trying to explain the current market sentiment(=difference between bears and bulls) in contrast with fundamental analysis, which tries to find a 'fair' value by using old data ( and most probably manipulated).
The reason for technical analysis not being a primary method of analysing financial, and not only, instruments was the lack of theoretical base. The last decades, behavioral finance appears to be the technical analysis' theory in order for the unbelievers to see that it is a complete science with both theoretical and practical approach methods of analysis.
