I have heard people lament how difficult it was to perform
technical analysis and how they can never learn the skills. There were also
many critics or fundamental believers that the stock market can never be timed and
that we market technicians are wasting our time trying to beat the market using
technical analysis. Technical analysis was thought to be a study of past price
behaviors and critics were saying the past doesn't reflect what will happen in
the future. They are both right and wrong. They are right because technical
analysis is not a crystal ball where it is 100% accurate. They are wrong
because technical analysis reflects the human emotions happening on the charts.
Do human change over the centuries? As far as emotions are concerned, fear and
greed are human nature that will never change! Humans will still do insider
trading even if it is illegal due to greed. We saw how corporate governance
though tightened over the decades was not fool proof to these criminals. Humans
will still fear losing paper profits and they will still fear declining stock
prices leading to declining capital. All these emotions can be found on the
charts as they happen. Ask yourself, how many times have you seen a stock price
run up before news is released? Anticipation of shareholders? Well, maybe but
how about insider leaking the news? Think about it.
Every night I study in details charts and it is through all
these relentless efforts that I became very familiar with technical analysis.
If a lawyer wants to win a case, he will study the case carefully and also
refer to past cases. We all know lawyers earn big money, but it is really this
hard work of preparation that justifies their huge pay. As a trader, we cannot
slack too. Hard work and efforts must be put in to learn technical analysis.
Long hours of studying these charts will enable us to be very proficient in
chart reading and recognize buy or sell signal in a flash as the experience
build up. There is no shortcut to success in trading as far as I'm concerned.
I started trading as a
loser and often times am only interested to know which the next stock to buy
is. This is not why legends made their fortune in the stock market. Every
single book that I read, advocate us to study past charts and get familiar with
all the chart patterns or price/volume relationship. Hence why shouldn't we
follow? After all, they are the ones who have done it and been there.
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