There has always been much debate surrounding trading techniques. For instance, proponents of fundamental analysis often look down upon technical analysis, while those who focus solely on technical aspects may consider fundamental analysis to be of little use. Additionally, some traders may dismiss technical analysis when it doesn't work for them, or criticize fundamental analysis if they don't make money from it. These are all rather shortsighted perspectives.
After years of trading, I believe that the last thing we need in trading is this "hierarchy of contempt": those who use naked charts looking down on those who use other technical indicators, those who use complex techniques belittling those who use simple ones, long-term traders looking down on short-term traders, and the mutual disdain between different trading methods.
In reality, there is no need for such attitudes. Any trading method that can make money, any technical indicator that can lead you to profit, is viable. Our goal is the same, so never let these external forms bind you.
Back to the topic, is trading technology really useful?
The chart shows an illustration of a top and bottom reversal pattern. On the left is the hourly candlestick chart of gold, and on the right is the hourly chart of the EUR/USD.
Although one pattern is at the top and the other at the bottom, they are very similar. I have marked points 1, 2, and 3 on both patterns. Point 1 indicates a stabilization of the market, point 2 shows a deep and rapid retracement, and point 3 is where the market makes a new high before forming a reversal candlestick pattern. Subsequently, the two moving averages cross, break the trendline, and the market reverses quickly.
Two different instruments exhibiting the same pattern, and such tops and bottoms often involve a fake breakout that lures longs and shorts, which is quite common. It's also because of this initial washout that a significant move often follows the reversal.
This is just one example. By doing extensive backtesting, you will find that the market is constantly repeating itself, with patterns and trends continually emerging.
There are no two completely identical leaves in the world, but there are many similar ones, and the same is true for market trends. There is no 100% identical trend, but there are trends with a high degree of similarity.
Why do markets exhibit such similar patterns? It's because human nature tends to be convergent. Regardless of the era or group, when faced with similar situations, people will make similar choices. For example, when risk aversion is high, everyone wants to hoard gold; when the stock market is doing well, everyone rushes to enter; when the market is bad, everyone flees in fear.It is precisely because human nature tends to be similar that trends will also keep repeating. We just need to identify these technical patterns and establish a certain success rate and risk-reward ratio to create a probabilistic advantage. By continuously trading the patterns that follow, we can achieve profitability.
The existence of technical analysis is not to find a holy grail, nor is it to find two identical leaves, but to optimize probabilities. The ultimate goal of technical analysis must always be to gain a probabilistic advantage.
So why do many people fail to profit from technical analysis?
There are essentially two reasons.
One is that their technical skills are not refined enough.
Many people have a bias in self-perception, thinking they already know enough and don't need to learn more, or they have never seriously immersed themselves in learning systematic theories and techniques. They rely on a superficial understanding of techniques and the so-called "market sense" to start trading.
Once they enter the real market, if they make money, they feel very confident, believing their techniques are excellent and their trading methods are unbeatable. If they lose money, they blame bad luck or problems with their trading methods, and they start changing indicators and techniques, but no matter how much they change, they continue to lose.
In essence, many traders are still amateurs, not having thoroughly learned trading techniques and systems, so the probability of losing is naturally high.
The other reason is poor self-control.
Having been in the industry for over a decade, I also spent a few years doing business in Africa, where conditions were indeed harsh, but I found the difficulty of trading to be even greater.Because in any other industry, there are fixed rules, and as long as you work hard, you will achieve some results, more or less. However, in the trading industry, there are virtually no rules; you are the one who sets the rules for yourself. At this point, if you lack self-control, you will inevitably let your desires run wild, chasing the market trends and buying high and selling low. This is a matter of human nature, not an individual issue.
Just like middle-aged men of my age who want to lose weight and reduce belly fat, it's actually a simple matter of controlling diet and exercise. However, most people can't control their appetite and are reluctant to exercise. I go to the gym every other day and have maintained this habit for many years, but every month or two, there are new faces. Everyone is someone with weak self-control, and this is the norm.
In the trading market, this weakness of human nature is magnified infinitely. If you are someone who usually has poor self-control and can't control your emotions well, you need to be more cautious in trading, as the probability of losses will increase.
Finally, I would say that technical skills are definitely useful, but if you don't master them thoroughly, they can also become a poison in your trading, just like undercooked Yunnan "Jian Shou Qing" mushrooms.
