Technical Analysis : Lets melt the myth

Technicians use the data that is generated by the markets itself: Price and volume to start, then many other data points and derivatives thereto.

Fibonacci Ratio is fun though I find 33-50-66 more common and none of these is Fibo ratio;

Elliot Wave Theory is a good tool to explain past and gather brownie points on social media/conf halls but the developing waves hide more than they reveal,making trading decision more complicated;

Trend following and entering a trend through  a pull back is no less easy;In fact, large trends are so rare that the (perceived)pull-back is mostly a consolidation( God forbid--Distribution) that leaves most players buying at top;

Pattern recognition --- pennants,flags,cups & handle,head and shoulders are primarily break-out strategies which are like 'spice of TA', if not done artfully,can very well boomrang;

Oscillators failing in a trend is  common knowledge and only a careful observer of Volume data can say when the sideways market is getting ready to break-into a trend.

And the result is we have more people teaching technical analysis than those using it to trade well. And it is these very 'teachers' who are responsible for spreading myths about different technical tools --- like Moving Averages 'causing' rebounds and Gann dates causing reversals.

All of us who have spent years in serious study and application of TA know it for sure that it has its limitation and if not coupled with proper money management -- it can spell disaster. There is as much Art as Science in the application of TA. That some people are lousy technicians proves only that it requires skill.

Then, do  technicals "work" or not ??

A better question to ask is "What information do charts and related data provide, and how can this be used by investors and traders?"

I posit that, when used appropriately, charts and data can provide tremendous insight:

-Provides a statistical approach to investing, one that describes the probabilities of various outcomes (versus making predictions)
-Charts show you if we are in a bull or bear market, allowing you to manage risk appropriately;
-Trends can keep you away from the wrong sectors (currently Real Estate,PSU Banks etc) keep you in the right sectors (eg., IT,pharma,Autos)
-Developing good risk/reward analyses;
-Tracking what the institutions are doing;
-Identifying specific stocks that might be appealing;

The bottom line is that TA is merely a tool, albeit one used more skillfully by some than others.

Technicals are not magic. They are not a way to forecast the future, nor are they a guarantee of future profits.