The Limitations of Technical Analysis
Let’s talk about technical analysis—or more broadly, situational analysis. One key issue is that it doesn’t offer real predictive power. Analysts can draw lines and patterns, but at the end of the day, any firm prediction is treated with suspicion—almost like fortune-telling.
But here’s the contradiction: if someone says, “I’m bearish because the global economy looks bad,” isn’t that also a prediction? It may sound more grounded, but it’s still a forward-looking statement based on interpretation—not certainty.
Now, let’s look at the practical drawbacks of technical analysis in trading:
You’re often told:
• Short at 104
• Buy back at 102
That’s the ideal setup—sell high, buy lower. Clean and simple.
But what if the price never gives you that second chance?
What if it breaks 107 instead? Then you’re told to wait for a pullback to go long.
But what if there’s no pullback and it blasts straight through 110?
Now what? Chase the high? Sit on your hands? Re-evaluate the whole system?
This is where technical analysis becomes problematic: it focuses too much on short-term fluctuations. You either end up chasing tops or missing out entirely because the “perfect” setup never appears.
The Realistic Approach to Trading
In actual trading (or as some call it, “combat”), you need to approach things differently:
• Use low leverage – protect yourself from sharp moves against your position.
• Allow room for error – markets are noisy; don’t expect pinpoint accuracy.
• Focus on the bigger picture – determine the overall direction and let the market work in your favor.
• Avoid getting caught in minor ups and downs – they’ll shake you out, trap your positions, and force you into loss-cutting and chasing.
If you get too obsessed with technical precision, you’ll often find yourself on the wrong side—shorting too early, cutting too late, and then buying back at the top. That’s the cycle you want to break.
That’s it. Keep it simple
