Candlestick Charting For Dummies, 2nd Edition

Chapter 17

Ten Tips to Remember about Technical Analysis

IN THIS CHAPTER

Getting some sound advice on technical analysis

Finding the right balance in your data

Remembering to back up your data

A debate continues to rage about the validity and usefulness of technical analysis in security trading. I’m a firm believer that when it’s used correctly, technical analysis is an outstanding trading and investing tool. Other methods of investing and trading exist, but for my purposes, technical analysis combined with candlestick charting has worked quite well. As you begin or continue your trading efforts, you’ll almost certainly encounter differing opinions on technical analysis, and I use this chapter to set out ten points on the topic that you should remember as you get down to the business of trading.

Charts Can Give False Signals

I’m the first to admit that sometimes — in some cases, up to 50 percent of the time — signals can be wrong. If all signals were reliable, you could see A and do B time after time, and you (and all your trading peers) would rake in the profits.

But the reality is that charts do give false signals, and it’s up to you to use proper money management to limit ...