richest people would be librarians."
- The critics also claim that signals about the changing of a trend appear too late, often after the change had already taken place. Therefore, traders who rely on technical analysis will react too late.
- Technical analysis made in short time intervals may be exposed to noise
, and this can result in erroneous reading of market trending.
- The use of most patterns has been widely publicized in the last several years. Many retail traders are quite familiar with these patterns and often act on them like a herd mentality. This creates a self-fulfilling prophecy, as waves of buying or selling are created in response to bullish
patterns.Advantages of Technical Analysis
- Many traders say that trading in the direction of the trend is the most effective means to be profitable in financial or commodities markets. Many famous traders have each amassed massive fortunes via the use of technical analysis and its concepts. George Lane, a technical analyst, coined one of the most popular phrases on Wall Street, "The trend is your friend!"
- Technical analysis can be used to project movements of any asset (which is priced under demand/supply forces) available for trade in the capital market.
- The technical approach concentrates on prices, which neutralizes external factors. Pure technical analysis is based on objective tools (charts, tables) while disregarding emotions and other factors.
- Signaling indicators can sometimes indicate the imminent end of a trend, before it shows in the actual market. With this, the trader can choose to take profit or cut losses.About the author:
TJ Chiam is an avid forex trader and writer. Did you know only 25% of forex professionals use technical analysis as their primary decision making tool? Learn how to trade the forex market like a pro. Visit http://www.forexsecretweapon.com
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