Why do you learn so many technical analysis methods, but still fail to trade well and make money?

Financial marekt is a no gun smoke, but extremely cruel battlefield.

Since the emergence of financial marekts in human history, countless people have embarked on the path of trading. Everyone who enters the trading market aspires to return with a full load and stand at the top of the food chain. However, most traders cannot escape the fate of loss and failure.

In this place, capable investors make money, while incapable investors just come to spend. Experts exchange experience for money, but novices exchange money for experience.

Every trader is striving to find a bright light to illuminate the path of investment and trading, and many people spend their lives searching for and trying various trading methods in an attempt to find the Holy Grail that can make trading profitable.

Among the many trading methods, technical analysis is arguably the oldest and one of the most important and effective.

Many traders learn technical analysis and are well-versed in various analytical methods, but when you ask them what technical analysis is, they don't get the answer.

Some people say that technical analysis is the study of patterns and indicators such as the triangle, head and shoulders, MACD, moving average, etc. Some people say that the essence of technical analysis is the three major assumptions, while others say that the essence of technical analysis is the public psychology behind the chart.

The key to learning technical analysis is to know what technical analysis is first. If you don't even explain this clearly, can you still talk about answering questions?

Sure, everyone has their own understanding, but in fact, technical analysis has a more accurate definition: technical analysis is a way of thinking that guides trading behavior by analyzing the price, volume, and time chart information of stocks, futures, and foreign exchange.

So, is technical analysis really useful?

This is a long-debated topic.

Some people say that the essence of technical analysis is to use historical information to predict future trends, which is ridiculous.

Some people say that technical analysis is by no means about predicting the future, but about helping you cope with the present.

Some people say that technical analysis is actually easy to learn. In trading, technical skills are not important. What matters are rules, discipline, and enforcement.

When I was a novice, I thought these three sentences really made sense, and they broke the secret in one sentence! Now it seems that each one is dead wrong, so I would like to clarify my point here:

The essence of technical analysis is to use historical information to predict future trends, which is ridiculous.

Wrong. Technical analysis uses historically known information to extract laws and predict future information. This is inductive reasoning, which is very reasonable.

Modern science is the edifice of inductive reasoning. For example, Einstein first deduced the constant speed of light according to the experimental results, and deduced it on this basis to obtain the special theory of relativity.

However, in the financial marekt, the application of inductive reasoning will be criticized. These people often quote the philosopher David Hume's point of view to show that induction is not reliable. Little do they know that Hume himself also said that "He who insists on reliable deductive justification for everything will starve to death. In reality, it is inevitable to accept induction."

- Technical analysis is not about predicting the future, but helping you cope with the present. Reacting without predicting is the way to survive.

Wrong. Whether it is technical analysis or fundamental analysis, it is all about forecasting. The so-called "do not predict, only deal with" is the concept of stealing. Orders and positions themselves are predictions, that is, predictions that the market will move in the direction of profitability.

The irony is that there is a culture in the trading circle where you say predict the market and are often despised. If you say you don't predict, you will be considered a master.

I want to say that we don't care about these noises, we just need to understand: because of the chaotic nature of the market, the trend cannot be completely predicted, any technical analysis method can only predict a small part, and the prediction is not necessarily correct. There is a probability of success or failure, so we must do a good job in risk control and position management to improve the robustness of the system.

- Technical analysis is actually very easy to learn, in trading technology is not important, what matters is discipline, mindset and execution.

Wrong. Many people do not have strong trading skills, but talk about discipline, mindset and execution, which is putting the cart before the horse.

Just imagine, if your trading system is negative expectations, no matter how strict the discipline, no matter how good the mentality, no matter how stable the execution is, it is just working hard in the wrong direction, and in the end, the bamboo basket will be empty.

Many investors have a key difficulty in the process of technical analytics learning: many technical analysis books give some formulas, what is the top deviation from bearish, the bottom deviation from bullish. This is like the mental methods of various schools in martial arts novels. Experts may use it immediately when they know it, but novices memorize it by rote, and it is basically ineffective. Some slightly reliable books will give some tricks, that is, legends of technical analysis, to tell you what kind of situation is good and what kind of graphics are bad, and then rely on everyone's own application.

For example, when learning the head and shoulders pattern, technical theory tells you that when the left shoulder of the pattern appears compound shoulder, there may also be a place where the head and right shoulder appear compound shoulder, but in the actual market, the compound shoulder may appear in many different ways. Some composite shoulders will be tested on the neckline every time they are formed, and some composite shoulders may have been completed in advance before the second test neckline. The theory of technical analysis cannot provide you with all the details. More needs to be experienced by traders through a lot of practical verification. If a trader simply grasps a technical analysis method and hastily makes a real trade based on it, their confidence in technical analysis will increase greatly when they are lucky, and they will begin to doubt life when they are unlucky. This lack of detailed exploration and self-summarization of learning methods obviously fails to achieve a thorough grasp of technical analysis and cannot make it their own.

Even if you have made a lot of effort in your actions, and even have a deep understanding of a certain analysis method based on theory, this does not mean that different traders will use the same technical analysis method with the same results. For example, in the analysis of wave theory, there has always been a problem of thousands of people and thousands of waves. If you establish the starting point of the wave at different prices, the results of the wave shape may be different. Although based on the theory, they are not wrong, but in the end it depends on the results. If you can make money from it, it means that you are right. If you lose money repeatedly, you cannot say that you are wrong. At least, this method may not be suitable for you. What you have to do is to get out of it in time and choose the method that can make you money.

There are many technical methods, if you want to learn, you must master them as thoroughly as possible, don't be lazy, let alone there are no winning secrets in the world. Even if there are, you won't win after reading it once. Success must belong to those who have worked hard in actual combat. In addition, the methods that can make your own money in practice should be used repeatedly, and the rest should be discarded as much as possible. The so-called addition in the early stage of trading, subtraction after trading for a long time, this is a trade-off.

When can a technical analysis method be used for a real offer? The answer, of course, is a large number of case studies.

First of all, using historical data and simulation disk verification, you will find that some aspects of this method are confirmed, and some aspects are still flawed.

Next, adjust the optimization for the flaws in the method until you are confident enough to use it for real.

Finally, with a very small position of real trading, found defects, and then adjust the optimization, when the real market can be stable profit, and then add the position.

It is a "bottom-up" way of thinking to validate abstract theoretical approaches with iconic case studies.

If it's just bottom-up, thousands of trading methods, one by one to deduce and verify according to the case, it's tiring. Combining bottom-up and top-down is more efficient.

Top-down refers to finding the laws of the objective world and applying them to transactions downwards.

Technical analysis is important, but it is only one part of a trading system. To trade well, you need to do the following four things:

Position management: The funds of leveraged trading should be well managed, and it is recommended not to exceed 20%. Different trading methods require different position management methods. This is not easy to generalize, but for beginners in trading, please remember: light position, light position, and then light position!

Mentality management: When you lose money in a row or lose a lot, your mentality will be very poor, and it is easy to make irrational behaviors, operate randomly, and want to make money back quickly. How to control your emotions and manage your mentality? The correct way is: either stop trading immediately on the same day, keep a light position for the next period of time, operate cautiously, and analyze the reasons to improve the trading system. Or take a break and start trading again after clearing your mind.

Fundamental assistance: In the technical analysis community, there are two types of people who need to pay serious attention to fundamentals: one is the mid- to long-term trader, and the other is the arbitrage trader.

Trading plan and review: plan your trading, trade your plan. Without a plan, it is equivalent to being blind and not doing a review. How can we sum up lessons and gain growth?