Enhancing Trader Performance: Why Use Technical Analysis?

smbcapitalDavid Blair, Trader DevelopmentLeave a Comment

*****David Blair, The Crosshairs Trader, is a blogger/trader/educator who does a wonderful job of sharing research on elite performance and how it relates to trading. Below is his latest post for the SMB trading community.***** — Editor’s Note

If you use some form of technical analysis (as I am assuming you do if you are reading this post via SMB) it is important that you establish your intent for doing so.  In other words, if you intend to use technical analysis as a predictive tool you will most likely be disappointed in its ability to consistently forecast future price action and you will most likely be considered foolish.  However, if your intent is to use technical analysis as a way of managing uncertainty (risk vs reward) then any losses sustained from the failure of your analysis will be considered an acceptable outcome out of several possible outcomes.  The following articles can help us understand and accept the power and the limits of technical analysis and provide direction for our intent of its use (vs its abuse).

Technical Analysis Defined (Wikipedia)

Technical Analysis and random Walks

“The truth is that technical analysis is indeed highly subjective.” (Finviz)

“Technical analysis is a precursor to building a good strategy.” (Financial Web)

“Technical analysis is only stupid if it loses us money.” (The Motley Fool)

“To my delight I discovered many successful traders and investors who had the track record to prove that Technical Analysis does work.” (ETF HQ)

“Despite inconsistencies in predictive value, technical analysis may be a useful tool as part of a broader strategy for managing holdings.”  (Stockopedia)

“Chart patterns can be identified, but it cannot be used to predict. Chart patterns can be used as a guide to your trading system.” (SIAS)

“By using technical analysis to anticipate the most probable direction of a price move and keeping losses in check, it is definitely possible to pull a consistent living from the markets.” (Trader Kingdom)

David Blair


no relevant postions.

Leave a Reply