/1 Technical analysis is the lowest alpha generating framework of the different viable approaches to markets.
It is only incredibly popular because of how accessible it is for retail participants. It is only viable because some participants use it. It is circular.
It is only incredibly popular because of how accessible it is for retail participants. It is only viable because some participants use it. It is circular.
/2 It is useful as a part of a trading framework (that sources its signals through other means) to choose entry and exit levels.
/3 Arguments for TA are caught in a double-bind: either it is alpha-generating, in which case it is equilibriumed out given its ease of use, or it is not, absent the mirroring effects.
/4 Affection for TA among traders also stems from apophenia. To see this, simply hide the candles of the asset you are charting, draw some arbitrary lines, and then unhide the candles.
/5 Below I drew 4 random horizontals, and then turned back on the candles for DOGEUSDT.
Your mind will immediately be drawn to arbitrary interactions of the lines and the candles (see The Art and Science of Technical Analysis by Grimes).
Your mind will immediately be drawn to arbitrary interactions of the lines and the candles (see The Art and Science of Technical Analysis by Grimes).
/6 A caveat - technical analysis shines with assets that we have trouble valuing, during periods of market stress, and broadly, during moments of uncertainty where we congregate on simple shared beliefs.
/7 I'll end by saying that this isn't some sort of calling out of technical traders. I trade technically, in part. But obsessing over TA and not exploring other trading frameworks handicaps your development and profitability.
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