Wednesday March 18, 2020 - 11:07:32 GMT
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Forex View: Do Traditional Technicals Work in a Crisis Market?
I wrote an article some time ago explaining why technical analysis works (see excerpt below). This is worth reading as many traders continue to rely mainly on traditional technicals in a crisis market that is being driven more by a need for liquidity than what charts are showing.
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Why does technical analysis work?
The answer may come as a surprise but it will help you to use technical analysis to predict future price action. This is a concept I want you to understand so you can use technical analysis and charts to your advantage.
Some pure chartists may want to take me out and burn me at the stake for heresy as I have a different view of why technical analysis works. Some see it as predictive, like Elliott waves. I see it the opposite. It is not predictive by itself but rather you can use it to predict price behavior and here is the reason why.
Technical analysis works because those who trade and follow markets use it. If they didn’t use it, then it wouldn’t work. The more people who use the same chart points and/or indicators, the more significant they become and thus it becomes easier to predict the reaction when a level holds or is broken….truncated
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So why does technical analysis work? It works because people use it. The more people who use it the more significant it can become. However, in a crisis driven market you can’t count solely on others reacting to a shift in technicals as would be the case in a normal market, You need more as explained in the following:
Sign up for the Amazing Trader now
Jay Meisler, co-founder
Global-View.com’
[email protected]
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