No. of Recommendations: 47
The biggest flaw in TMFOtter's article (as well as implicit in Train's buffoonish bet proposal) is that technical analysis is predictive. Unfortunately, the vast majority of TA critics, as well as many TA practitioners, cannot wrap their brains around the fact that TA is NOT a predictive tool, it is a descriptive one.

I have never looked at a chart with the thought that I could somehow predict where the stock would be in a week, month or year. Nobody can do that.

I can only see whether a stock is being accumulated or distributed and whether it is close enough to support/resistance for me to make a trade with an acceptable risk/reward ratio.

TA is simply an effort to better calculate the odds so that you only place your bets on situations which you believe are most favorable to you.

This must be combined with an effective money management strategy (which is probably far more important than the TA element of any trading system) to be productive.

When a player counts cards in blackjack, he does not do so to predict what the next hand will be. He does so to constantly recalculate the odds based on the most recent hand(s) dealt so he then knows how to adjust his money management system.

TA attempts to do the same thing in the stock market. It is certainly reasonable to argue about whether TA is effective or ineffective in doing so.

But as long as you are hung up on the notion of TA being "predictive" there can be no useful discussion on the topic.

Those who label TA advocates "tea leaf readers" simply lack an adequate understanding of the approach.

To me, the buy and holders who look at things like balance sheets and income statement are the "tea leaf readers."

Me? I'll never pretend to have even the faintest idea of where the market or any stock will be next month or next year.

I don't think it's possible to predict the market. That's why I use TA.

-chris
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