An endless debate
Open any stock or cryptocurrency forum, and you will always see two groups arguing fiercely: one group treats technical analysis as a money-making tool, believing that reading candlestick charts can predict price movements; the other group feels it is no different from fortune-telling, purely guesswork. This debate has lasted for decades and remains inconclusive. Just as some people believe in astrological fortunes guiding life, others think it’s all a trick. Is technical analysis reliable? The key lies in how you use it.
The essence of technical analysis
In simple terms, technical analysis predicts future market trends by studying historical price movements. It is based on three fundamental assumptions:
1. Market behavior contains all information
2. Prices evolve in trends
3. History tends to repeat itself
It sounds reasonable, right? But the problem is that the market is made up of people, and human behavior can be both patterned and often unpredictable. That’s why technical analysis can be effective at times and ineffective at others.
Things those technical analysts won’t tell you
I have seen too many people obsessed with studying various technical indicators like MACD, KDJ, RSI, Bollinger Bands... The more indicators they use, the more complex the lines on the screen become, yet their account balances keep decreasing. Where does the problem lie?
First, all technical indicators are secondary processing of historical data and are essentially a rearview mirror. They can tell you what happened in the past but cannot accurately predict the future. Second, the more people use technical analysis in the market, the more likely these technical patterns become self-fulfilling prophecies, as everyone thinks a certain price level will bounce back, leading to real buying at that level and causing the rebound.
A harsh reality
There is an old saying on Wall Street: 'Chart analysis is an art that makes smart people poor.' Although this statement is extreme, it is not without reason. If technical analysis were truly magical, those who teach others to read candlestick charts would have already made their fortunes in silence instead of selling courses.
The reality is that there are no 'sure-win' technical patterns in the market. Behind every successful trade are countless failures. Those perfect predictions that are widely publicized are often just survivor bias; people remember only the accurate predictions and automatically filter out the incorrect ones.
So why learn technical analysis?
Since technical analysis is not omnipotent, why do so many people study it? Because it is currently the best market language translation tool. Just as weather forecasts cannot be 100% accurate, we still check them.
The greatest value of technical analysis lies in:
1. Provides an objective decision-making framework to avoid completely emotional operations
2. Helps identify market sentiment and potential turning points
3. Establish clear risk management standards (e.g., stop-loss levels)
Correct usage
True experts never rely solely on technical analysis. They combine technical and fundamental analysis, focusing more on basic concepts like support and resistance levels rather than complex indicators. They understand that technical analysis is a probability game with no 100% certainty, and strictly control their positions while managing their funds.
Remember, technical analysis is meant to assist decision-making, not to serve as a crystal ball predicting the future. Its true function is to help you develop a trading plan rather than tell you that prices will definitely rise tomorrow.
Personal experience
In the early stages of my career, I was also obsessed with finding the perfect indicator, and the result was predictable. Later, I gradually understood that instead of pursuing prediction accuracy, it is better to establish a robust trading system. The technical analysis I use now is very simple:
1. Determine the major trend (upward/downward/consolidation)
2. Identify key price levels
3. Develop a trading plan (at what price to enter, at what price to exit)
4. Strict execution: cut losses at the target price without emotions
The result of doing so has turned out much better than before. Because the market is unpredictable most of the time, but there are relatively certain moments. This confirms the saying: trading is not about who predicts better but about who has lower costs of mistakes. The value of technical analysis is to help you identify these moments.
Conclusion: Useful but limited
Back to the initial question: Is technical analysis useful? My answer is: Useful, but limited. It is like the rearview mirror of a car; it helps you see the road you traveled but should not be relied upon entirely for driving. What truly determines investment success or failure is always the more fundamental aspects of risk control, money management, and emotional control.
Finally, let me share a piece of advice: In the financial market, simple methods are often more effective than complex ones. Instead of pursuing foolproof technical indicators, it is better to establish a simple and reliable trading system and then execute it consistently. This is the key to long-term profitability. Follow the public account: Coin Look to the Future. Welcome to communicate and learn.
(This content is only for the learning and communication of crypto enthusiasts. Please view it rationally, establish the correct concept, and enhance risk awareness. Please click to bookmark or recommend it to those in need.)
