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Technical Analysis Doesn't Work



โ€œ๐™„ ๐™ง๐™š๐™–๐™ก๐™ž๐™ฏ๐™š๐™™ ๐™ฉ๐™๐™–๐™ฉ ๐™ฉ๐™š๐™˜๐™๐™ฃ๐™ž๐™˜๐™–๐™ก ๐™–๐™ฃ๐™–๐™ก๐™ฎ๐™จ๐™ž๐™จ ๐™™๐™ž๐™™๐™ฃ'๐™ฉ ๐™ฌ๐™ค๐™ง๐™  ๐™ฌ๐™๐™š๐™ฃ ๐™„ ๐™ฉ๐™ช๐™ง๐™ฃ๐™š๐™™ ๐™ฉ๐™๐™š ๐™˜๐™๐™–๐™ง๐™ฉ ๐™ช๐™ฅ๐™จ๐™ž๐™™๐™š ๐™™๐™ค๐™ฌ๐™ฃ ๐™–๐™ฃ๐™™ ๐™™๐™ž๐™™๐™ฃ'๐™ฉ ๐™œ๐™š๐™ฉ ๐™– ๐™™๐™ž๐™›๐™›๐™š๐™ง๐™š๐™ฃ๐™ฉ ๐™–๐™ฃ๐™จ๐™ฌ๐™š๐™งโ€

- ๐™’๐™–๐™ง๐™ง๐™š๐™ฃ ๐˜ฝ๐™ช๐™›๐™›๐™š๐™ฉ๐™ฉ


๐Ÿ“š There are two main approaches to investing, ๐™›๐™ช๐™ฃ๐™™๐™–๐™ข๐™š๐™ฃ๐™ฉ๐™–๐™ก ๐™–๐™ฃ๐™–๐™ก๐™ฎ๐™จ๐™ž๐™จ ๐™–๐™ฃ๐™™ ๐™ฉ๐™š๐™˜๐™๐™ฃ๐™ž๐™˜๐™–๐™ก ๐™–๐™ฃ๐™–๐™ก๐™ฎ๐™จ๐™ž๐™จ. A fundamental analyst will look at the income statement, cash flow statement, balance sheet and all other information about a certain business to make their analysis. A technical analyst will look at patterns on the price charts and try to predict future price movements.


๐Ÿ“ˆ For example, for a fundamental analyst, investing in copper miner, FreePort-McMoran $FCX to know about the demand/supply of copper along with inventories and from these try to see how the business will do in different scenarios. The technical analyst will just look at some patterns on how the stock did in the past and try to predict the future.


"๐˜พ๐™๐™–๐™ง๐™ฉ๐™จ ๐™–๐™ง๐™š ๐™œ๐™ง๐™š๐™–๐™ฉ ๐™›๐™ค๐™ง ๐™ฅ๐™ง๐™š๐™™๐™ž๐™˜๐™ฉ๐™ž๐™ฃ๐™œ ๐™ฉ๐™๐™š ๐™ฅ๐™–๐™จ๐™ฉโ€ - ๐™‹๐™š๐™ฉ๐™š๐™ง ๐™‡๐™ฎ๐™ฃ๐™˜๐™


โŒ› Most people, however, are technical analysts and there are some good reasons for that. People don't want to be bored and ๐™œ๐™ค๐™ค๐™™ ๐™ž๐™ฃ๐™ซ๐™š๐™จ๐™ฉ๐™ž๐™ฃ๐™œ ๐™๐™–๐™จ ๐™ฉ๐™ค ๐™—๐™š ๐™—๐™ค๐™ง๐™ž๐™ฃ๐™œ. So, they would rather look at charts everyday. If millions of people react to the same trend the same way, it works. Does it?


๐Ÿš€ According to the ๐™€๐™›๐™›๐™ž๐™˜๐™ž๐™š๐™ฃ๐™ฉ ๐™ˆ๐™–๐™ง๐™ ๐™š๐™ฉ ๐™ƒ๐™ฎ๐™ฅ๐™ค๐™ฉ๐™๐™š๐™จ๐™ž๐™จ (๐™€๐™ˆ๐™ƒ), stock investing should not work and everybody are better off investing in the S&P 500 $SPX500 . But we know that this is not true. I saw a market inefficiency in GameStop $GME and made over 3300% profits. Warren Buffett wrote an article, "The Superinvestors of Graham and Doddsville" explaining why EMH is not true. Then, those economists came up with three versions of the EMH and in the weak version, technical analysis only is not supposed to work while fundamental analysis works.


๐Ÿค– Fundamental analysis works because you can find market inefficiencies while reading financial reports. The inefficiencies with GameStop that I saw were that the losses were not real and were just because of impairment of goodwill and also over 200% of float was short. The ๐™—๐™š๐™จ๐™ฉ ๐™ฉ๐™š๐™˜๐™๐™ฃ๐™ž๐™˜๐™–๐™ก ๐™–๐™ฃ๐™–๐™ก๐™ฎ๐™จ๐™ฉ๐™จ ๐™ฉ๐™ค๐™™๐™–๐™ฎ ๐™–๐™ง๐™š ๐™˜๐™ค๐™ข๐™ฅ๐™ช๐™ฉ๐™š๐™ง๐™จ which will never find these market inefficiencies. And trying to beat these computers as a technical analyst is getting harder and harder and is not worth the time.


Maybe sometimes technical analysis works, but fundamental analysis is much more reliable, can make you much more and with less work.


Watch the full video on YouTube:

https://www.youtube.com/watch?v=vyPFNCdTAkI&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=2




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