Why Technical Analysis in Trading is Useless

Disclaimer: this study contained only a few samples, and may not be statistically significant. All investments is speculative in nature and involves substantial risk of loss. I encourage our readers to invest carefully. I also encourage investors to get personal advice from your professional investment adviser and to make independent investigations before acting on information that I publish. Much of my information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable, but are without our independent verification. Moreover, I am speaking only from my personal experience, unless otherwise noted. Therefore, I cannot assure you that the information is accurate or complete. I do not in any way warrant or guarantee the success of any action you take in reliance on our statements or recommendations.

I have always wondered about technical chart analysis, but looking at the short experiment I did with a trading bot, its hard to justify its appeal.

Okay, so technical analysis in this context is simply looking at a bunch of indicators and making an "educated" guess on where the market price will eventually land. So if a line moves here or crosses with another line or forms this pattern, then make a "Buy" or "Sell" move.

Of course, it is inevitable that trading websites would create bots that you can use to automate when to Sell or Buy.

So to figure out if they were any good, I signed up for a bot on binarybot.online and started trading. I put in a high limit to get more trades in and the results where quite underwhelming. Given that the bots are created with the best and proven algorithms, they should've produced great results, right?

Out of the 177 trades, 55.4% (or 98 trades) had me on the winning side. Not bad but not as good as I was expecting. In fact, if you toss a coin to determine your next trade you would almost come close to this result.

Looking closer at the data, we will see the different types of trade strategies used by the bot and how each one fared.

As you can see, two trading strategies came out as high performing: Surface and Grond Zero (yes, that's how its spelled).
Surface had a winning percentage of 90.9% while Grond had 77.8%.

So you might be saying to yourself, "Great! These are the 2 trading strategies I would use from now on!"

Well, yes and no. If your jus tlooking at winning %ages, then yes they would be the best candidates. However, if you look at their average winning amount, they are also the lowest. Surface has a winning average size of $0.15, the lowest of all the strategies. Remember, with options, you win only a certain percentage of your total "investment" while if you make the wrong bet, you lose it all.

So which strategy should I choose? Well, none really. It is known in options trading that you would need to win 2 out of 3 trades to at least break-even, and none of the strategies showed much promise.

I also did follow up trades and all of them eventually ended up on the losing side.

Disclaimer: this study contained only a few samples, and may not be statistically significant. All investments is speculative in nature and involves substantial risk of loss. I encourage our readers to invest carefully. I also encourage investors to get personal advice from your professional investment adviser and to make independent investigations before acting on information that I publish. Much of my information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable, but are without our independent verification. Moreover, I am speaking only from my personal experience, unless otherwise noted. Therefore, I cannot assure you that the information is accurate or complete. I do not in any way warrant or guarantee the success of any action you take in reliance on our statements or recommendations.