Is technical analysis a reasoned approach <\/em><\/strong>for In a word, the answer is \u201cHell No!<\/em>\u201d. (Actually, that\u2019s two words. Feel free to drop the adjective). Although many technical analysts earnestly believe their craft, the approach has no value and does not hold up to a fundamental (aka: facts-based<\/em>) approach.<\/p>\n One word arrogance comes with an obligation to substantiate\u2014and, so, let\u2019s begin with examples of each approach.<\/p>\n Investment advisors often classify their approach to studying an equity, instrument or market as either a fundamental<\/i> or technical<\/i>. For example\u2026<\/p>\n Do you see the difference?<\/i> Fundamental analysis is rooted in SWOT: Study strengths, weaknesses, opportunities, and threats. Technical analysis dismisses all of that. If technical jargon and approach sound a bit like a Gypsy fortune teller, that\u2019s because it is exactly that! It is not rooted in revenue and market realities. Even if an analyst or advisor is earnest, the approach is complete hokum.<\/p>\n I have researched, invested, consulted and been an economic columnist for years. I have also made my mark in the blockchain space<\/a><\/span>. But until now, I have hesitated to call out technical charts and advisors for what they are\u2026<\/p>\n Have you noticed that analysts who produce technical charts make their income by working for someone? Why don\u2019t they make a living from their incredible ability to recognize patterns and extrapolate trends? This rhetorical question has a startlingly simple answer: Every random walk appears to have patterns<\/em>. The wiring of our brain guarantees that anyone can find patterns in historical data. But the constant analysis of patterns by countless investors guarantees that the next pattern will be unrelated to the last ones. That\u2019s why short term movement is called a \u201crandom walk\u201d. Behaviorists and neuroscientists recognize that apparent relationships of past trends can only be correlated to future patterns in the context of historical analysis (i.e. after it has occurred).<\/p>\n Decisions based on a technical analysis\u2014instead of solid research into fundamentals\u2014is the sign of an inexperienced or gullible investor. Some advisors who cite technical charts know this. Technicals have no correlation to long term appreciation, asset quality or risks<\/i>. They only point to short term possibilities.<\/p>\n The problem with focusing on short-term movement is that you will certainly lose to insiders, lightning-fast program traders, built in arbitrage mechanisms and every unexpected good news\/bad news bulletin.<\/p>\n If you seek to build a profit in the long run, then do your research up front, enter gradually, and hold for the long term. Of course, you should periodically reevaluate your positions and react to significant news events from trusted sources. But you should not anguish over your portfolio every day or even every month.<\/p>\n Finally, if someone tries to dazzle you with charts of recent performance and talk of a \u201cresistance level\u201d or support trends, smile and nod in approval\u2014but don\u2019t dare fall for the Ouija board. Send them to me. I will straighten them out.<\/p>\n Who says so? Does the author have credentials?<\/strong><\/p>\n I originally wrote this article for another publication. Readers challenged my credentials by pointing out that I am not a academic economist, investment broker or financial advisor. That\u2019s true\u2026<\/p>\n Does all of this qualify me to make dismissive conclusions about technical analysis? That\u2019s up to you! This Lifeboat article is an opinion. My opinion is dressed as authoritative fact, because I have been around this block many times. I know the score.<\/p>\n Related:<\/strong><\/p>\n <\/i>Philip Raymond<\/a> co-chairs CRYPSA<\/a><\/span>, hosts the Bitcoin Event<\/a><\/span> and is keynote speaker at Cryptocurrency Conferences<\/a><\/span>. He sits on the Lifeboat New Money Systems board<\/a><\/span>. Book a presentation<\/a><\/span> or consulting engagement.<\/em><\/p><\/p>\n","protected":false},"excerpt":{"rendered":" I love clearing the air with a single dismissive answer to a seemingly complex question. Short, dismissive retorts are definitive, but arrogant. It reminds readers that I am sometimes a smart a*ss. Is technical analysis a reasoned approach for investors to predict future value of an asset? In a word, the answer is \u201cHell No!\u201d. [\u2026]<\/p>\n","protected":false},"author":353,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1318,43,1761,39,45],"tags":[2161,1884,3081,3082,3083,3084,3085],"class_list":["post-79444","post","type-post","status-publish","format-standard","hentry","category-bitcoin","category-business","category-cryptocurrencies","category-economics","category-finance","tag-bitcoin","tag-cryptocurrency","tag-economist","tag-financial-research","tag-fundamental-analysis","tag-stock-analysis","tag-technical-analysis"],"_links":{"self":[{"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/posts\/79444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/users\/353"}],"replies":[{"embeddable":true,"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/comments?post=79444"}],"version-history":[{"count":10,"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/posts\/79444\/revisions"}],"predecessor-version":[{"id":84080,"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/posts\/79444\/revisions\/84080"}],"wp:attachment":[{"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/media?parent=79444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/categories?post=79444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lifeboat.com\/blog\/wp-json\/wp\/v2\/tags?post=79444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
investors to predict future value of an asset?<\/em><\/strong><\/p><\/blockquote>\n
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<\/a>I am not an academic economist, but I have certainly been recognized as a practical economist<\/em>. Beyond investor, and business columnist, I have been keynote speaker<\/a> at global economic summits. I am on the New Money Systems Board<\/a> at Lifeboat Foundation, and my career is centered around research and public presentations about money supply, government policy and blockchain based currencies. I have advised members of president Obama\u2019s council of economic advisors<\/a> and I have recently been named Top Writer<\/em> in Economics by Quora.<\/p>\n\n
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