The chart delusion
I love reading other peoples technical analysis of charts, because more often than not it's pure speculation (in other words 100% horseshit).
The amazing thing is, everyone pretty much gets taught the same thing, what patterns to look for and how to trade them. As I mentioned in another post, they never stop to think about who is teaching them, or why, and it's usually because that person has a conflict of interest, ie, they stand to make money when you lose.
Humans have evolved over millions of years as pattern recognition machines, which is why most people looking at two dots and a curve see a smiling face...
The problem with chart patterns for technical analysis, is once you know a few of the patterns you begin see them everywhere.
Take the following bar chart for example, with highs, lows and close.
Lets see what would happen if you gave it to a technical analyst for their opinion. First of all we'll draw some support and resistance lines, which are fairly obvious.
You can see that the market made an initial top around point A, and then again at point B, and once more a few weeks laters, thus confirming an important resistance line. The price finally broke though and made a new high at point C before quickly retracing into a sustained downtrend. This ended in a long pinbar/hammer which indicated the price would soon start recovering, which it did. Notice also the gap down and pinbar at point D, signifying the buyers coming into the market at the extreme low.
Lets see what other technical analysis we could do on this chart. You can see that the initial stage of the chart was a setting up of a classic head and shoulders pattern, prior to that long downtrend, even the most incompetent trader could have seen that coming !
The stand out point on this chart for me though, is that support/resistance line in the middle. Look how many times it was tested and rejected, then broken, then bounced back. It would result in high probability trades if you were to keep an eye on that line and enter trades around it.
I could go on an on about other aspects of the chart and other patterns on it for ever, but there's no point because it's all horseshit. That isn't even a stock chart, it an annual temperature chart... It has absolutely nothing to do with trading, there are no buyers, no sellers, no market pressures, just the range of temperatures on days throughout the year.
See how easy it is to make stuff up and have people believe you ? See how easy it is to get sucked into seeing patterns that don't exist, or at least don't have any significance whatsoever ? Take any chart of data, showing literally anything with ranges, and you can lay stock patterns over them all day long.
Don't believe me ? How about this chart then.
I'll draw a few support and resistance lines on it.
See how the price touched those lines on multiple occasions and where it got rejected ? Or how about this triangle/flag/pennant pattern here and the breakout to the downside ?
Or how about the fact the whole thing is a head and shoulders pattern ?
Nope, it's still all horseshit. That chart is literally the result of tossing a coin in the air, 150 times (accumulatively). Still no traders, no stocks, no pressures, just the random result of a 50/50 outcome.
So my advice is, be very very wary of people performing technical analysis of charts, and there are a metric shit-ton of them here on Steemit. I'll guarantee that the majority haven't got a clue what their talking about, so you would be very stupid indeed if you risked any of your own money on anything they had to say.
As a final note, please don't think that I consider all technical analysis to be bunk, as I don't. I would consider myself a technical trader after all ! The problem is you need to understand how technical indicators are formed, and the psychology of them, and the underlying monetary forces that make them happen in order to use them successfully.
Just drawing a handful of lines on a chart and making pronouncements about how the price is going to 'obey' them is pure hokum.
Disclaimer : If you blindly act on the advice of strangers from the internet then you're an idiot and probably deserve to lose all your money. There's no fast track to success. Do your own research and make informed decisions based on all available evidence.
Maybe currently technical analysis is not that effective compared to stock market, but it still useful to spot out some major support and resistance points.
oh absolutely, I kind of gave the impression that it was all bunk and it's not, just that a lot of so called 'experts' are consistently doing it wrong.
I was looking at a whale post the other day and he was claiming that a line that was touched only twice over 3 months ago, from the same direction, made it a 'major support line' and price would bounce off it. What a crock of shit, clearly hasn't got a clue what a support line is or where to draw it.
People were actually writing back 'oh wow, when it gets to that line I'm going to buy'. Really sad :-(
I use technicals to trade all the time (including S&R), so I didn't mean to offend anyone else who genuinely uses them, just the charlatans who are making people lose money with their fake advice.
Finally someone around that actually do some work to understand what technical analysis is about!
I started the trader Road around 8 months ago, with a big way still to actually call myself a trader, but It is so refreshing to see someone that dont Just talk bullshit.
I also write about Trading, mostly what i am learning, and your advice Will be Very welcome to point out what i am saying/learning wrong.
I Will have my upvote as always as possible.
Welcome around. We definetly need more pele like you around.
Besides that, have you joined Any discord Channel a already? I would like to talk some ideias with you.
Thank you for your nice comments, glad to be here.
I haven't joined any Discord channels yet to do with trading, only gaming channels. I use VPNS that Discord doesn't like, so I get kicked off a lot and have to do verification all the time which is a pain. I tend not to use Discord now if I can help it.
If you have a channel then post the link and I'll try...
I always question reality. Thanks for writing about this. You are right....it all depends on peoples motivations and what predictions some may WISH to occur. Then they can manipulate others to their preferable outcome.
Thanks. If someone is telling you that price is going to go up and you should buy at 'X' level, you can damn well bet they've got a stack of them already...
Great post. I used to subscribe to stock trading services...some good...some not so good. I leaned a lot, mostly from the failures. But it always seemed like the stock 'gurus' were scalping profits off the subscribers. In the end, I concluded that if I was going to commit to trading, I needed to trade on my own and not rely on alert services. I needed the accountability because it was too easy to blame failures on the people picking the trades.
thanks, it's a shitty industry, absolutely merciless when it comes to taking advantage of people and robbing them of their money.
Thanks for the post! It's so true..
I know, and sadly people make an awful lot ot money peddling this bunk :-(
To funny and completely correct. The thing is people on here do technical analysis because that is the quickest way (in apparently many people's opinion) to post something that's pretty much a spam post but shows you think you know what you are talking about. There are whales that do this, lol that is the phenomena of that on here. Yes it is very annoying seeing it as a market enthusiast, but not a professional. I can only imagine the frustration in being a pro and seeing a bunch of people bs their way through something this is highly objective and speculative to begin with. I am a big fan of baseball and there has been a widespread of highly technical analysis' passed by algorithms. The data is good to know, but to take it one step further I would want to know what the data is dynamic at certain points, or what will cause this data to change down the road especially dealing in equities. Lol, anyway, I read your posts they are quite good, but undervalued. I go around steemit and find people like yourself and invite them/you to a curation trail that I ran. What the hell is that? It's a voting system that I set up that will get you upvoted by several other people in a carefully managed system that will help you retain your voting power and vote other posts outside of this circle as well, which is highly recommended by the way. I answer replies as they come in, feel free to ask any questions/comments I am always happy to help answer them. Keep up the great work I hope to hear from you soon @tradergurl!
Thanks for your kind words, I gather posts on here are very 'short lived' ie only get read in the first couple days then get passed over for newer stuff.
It's fairly easy to tell who knows what and who's blagging it. The same is probably true for all fields. There's one (infamous) technical analyst on here, and I swear all his analysis is computer generated. It reads like the spam people put in web page headers to maximise search engine results.
"a blue cat loves icebergs depending if the clown isn't late before giving a monkey apricots"
It's exactly like that, except with trading jargon ! Still, he makes around $300 a post, so he must be right...
Regarding the voting system, I haven't really got my head round how Steemit works yet (other than most profit seems to come when you break all the community rules lol). Give me some more details and I'll have a look at your voting system. I have to say, I'm very against bots, rings etc but if it makes sense then I'll consider it, thanks.
Those people that have $300 posts for their "analysis" are spammers that are pure fakes that try to get everyone to jump on their bandwagon. Total mirages, don't worry everyone will start ignoring them eventually if steem can stay low for a while. I am also against most bots on here for the most part, they are great tools but too often used wrong, poorly explained, whatever problem they are single situational fixes that are over used for solutions. That not coincidentally is exactly why I started this curation trail on steemauto, lol, if that makes any sense. I like comment bots or like the minnowbooster upvotes so that if you are a small fish you get someone an upvote if you are recovering you voting power and want to give someone a pat on the back for a good post. The bots being pretty much worthless is not at all coincidentally why I started this curation trail. So basically it is geared up to vote when you can gather the highest curation rewards by timing as best as possible. There are long posts in how curations are figured, they make it quite complicated. To make a long story short, timing is everything, and voting on the right post is also very important of course. We have this set up so that it is proportional, so if you followed (the trail) at say, 100% you would vote on everything I do with the same percentages of your vote. I have it set right now basically to allow me a few 100% upvotes daily outside the trail members I am auto following as they post. So if you followed it at say for example 40%, you would be looking at using just around half of your voting power daily for this trail, leaving you with the other half (4-5 100% votes) daily that can be used, all while being able to recoup voting power to get to (very close to) 100%voting power each day. More or less most of the trails on there are just a bunch of people that are voting behind someone and they are blindly throwing votes behind a whale or something. Or they are voting behind a curation hunter that is a 10 times bigger than everyone else, promising the people that join monster curation rewards, which in my opinion is not completely genuine. What I can promise is that you will have ample opportunity to gather curation rewards, get upvoted so that you have a very solid starting point each time you post, and get well acquainted with the communities I work with as well. The nice thing about this is that if you don't like it for whatever reason you can always choose to unfollow it just as easily as you followed it. There are some settings that I can help you with getting started on steemauto. You pay steemauto 0.001sbd to verify your identity, i will send you that, none of this costs anything. That's it, sorry I turned it into a novel for an explanation but that's about it, I've spent a lot of time going over the settings of the cryptkeeper17 (trail name under search trail name on steemauto) to ensure it's not abused or done unfairly. BTW nobody on this scale votes at a higher percentage for everybody as this is set up as I do, because everyone follows my upvotes on posts. My comment votes (which I rarely manually upvote-usually use a bot) aren't followed. Great questions, let me know if there are more!
wow man, thanks for the long reply ! I'll have a look into it because tbh I haven't learned anything about Steemit yet, just been posting my stuff and messing around, mostly just looking for people to talk to lol.
btw that's another 'tell' that people are blagging it, when you say hello in a message and introduce yourself as a fellow trader, and they totally ignore you. And you know for sure they've seen the message as they've replied to the one after yours. I think they don't want to strike up a conversation because it'll blow their cover, lol.
Lol and to be honest, I really don't care whether they are or not. I think there are a lot informed people out there, and one here for sure, and a lot of the time I am a more curious of qualitative analysis anyway, lol. Great, I don't sell anything to people here on steemit, I let their free will take over after they have the evidence. I am not going anywhere, so when, or if you are ready I will be here quite a bit (God willing of course, lol).
cool, thanks !