Yes but if enough people believe it works it can work pretty well actually. At least in the short term.

Traders set the market in the short term so as much as I think it is ridiculous TA matters. Unless you are DCAing into bitcoin daily and don't care about anything else. Which is my current investment strategy.

Heard a story about some trading charting software with the fancy TA indicator line things which people had been using for years but was actually being drawn the wrong way round

they're self-fulfilling prophecies broken by the outside world's messiness.

There is (of course....) no God of the Market that makes things move in some mystical directions. But traders want "rules" so they can trade; if the other traders also believe in these rules, then they act by them, and acting by them makes them come true.

Algorithms need to be trained somehow on how to trade - algorithmic trade happens in milliseconds without human intervention - and then, these humans looking at charts divining things become trading rules algorithms use, thereby strengthening the self-fulfilling prophecy.

But these can only ever be "internal", i.e. they make rules only based on price movement; there is no outside world to these, and in the real world, there is, of course, an outside context problem to movements. These can and do break these rules regularly. They'd only work 100% if a) ALL traders used them all the time and b) market price movement happened in a vaccum without outside context problems.

Yes, Iain Banks reference. ;)

Nope, technical analysts (the GOOD technical analysts) are not fortune tellers.

Technical analysys is based on probabilities, and on past statistics (for exemple what happened if price was rejected from a resistance, etc)... In this way was formed the patterns (every pattern have their sense), and peoples learned about how it works "usually". And it is a most dose of psychology :) If a lot of peoples (a lot of capital) think the same thing, and start to make actions on this direction (short or long), the price is obligated to follow this, because of the supply / demand ecuation... The problem is when a bigger capital think to "trap" these "smallest capitals", and make a big order in other direction (bull trap / bear trap). These are the whales (in crypto usually the big institutions). This is the cause, that technical analisys is never 100% sure, and a normal trader / analyst never say you, that is sure price will go up / down...The correct affirmation is, that "we have 80% to price increase, but never can exclude the opposite"

No, it isn't. It's actually a math/graph way to analyze the psychology of the mases.

I'm by no means an expert, but when I was into investing I was more of a fundamentals guy. I picked up enough to know that the theory is based on human psychology. Humans react predictably to price action. But, what has happened is that traders react to the patterns. It seems almost like a solipsistic loop at times.

I don't think it is mystic astrology if the person know what they are talking about. From what I understand, the lines basically mimic human behavior. Markets move up and down based on human psychology, so the lines just show that and after a while certain patterns have a higher probability to move up or down.

Sure seems that way - at least for the talking heads on TV. They make vague predictions and change them all the time when they are wrong.

The truth is that technical analysis has been prostituted by many people who don't study enough. When I studied technical analysis, I got the idea that the goal was to find patterns that have happened in the past. There are good books that explain well the relationship between these patterns and the behavior of traders. What happens today is an aberration, because people are looking for these patterns and do not even apply the basic principles of them. For example, it is normal to see people drawing patterns in which the candlestick chart is even identical but then they forget to look at the volume and time frame of the pattern. Another common mistake is to draw support/resistance with only one or two points, when the books say that the minimum is three touches. These are just a few examples, but many more exist. Personally, I think the simpler the better, nowadays I only use the 50 and 200 daily moving averages and a border between bear/bull market.

You make a good point.

Technical analysis works like a self-fulfilling prophecy in my opinion.

All traders share these technical analysis tools.

Since everyone reacts in the same way when they see all these patterns appearing that have been defined in the literature, the market reacts in the same way.

It's a self-fulfilling prophecy, and since everyone buys into it, you can't go against it.

That's where Bitcoin changes the game, because if you understand the why of Bitcoin, you're in it for the long haul and can detach yourself from all these patterns and technical analyses to concentrate on more important things!

I feel ya @kr. Right there with you. A few years ago I watched a guy teach lay people how to read charts. The whole double bottom, new low, typical stuff you see people do when they draw on charts. But, he was very honest about it. They cannot predict the future. There is always something that isn't predictable.

What I took away from this as I was doing some minor trading at the time was that if you do this long enough you could get good at recognizing patterns. You could use that knowledge of pattern recognition coupled with access to information to make informed predictions. But, I suck at it.

Now, we have the people on TV, Twitter, and elsewhere that are always making bold predictions. To me most of them are just snake oil. But, I don't doubt there is some skill and pattern recognition in it. Its not just magic or guessing.

I landed on @ODELL's advice. Stay humble, stack sats. I'm not a gambler. I'm not looking to become rich by some sly trick. I wanna see a better world where we can save the rewards of our work in something that will not be diluted into nothing.

a few more points that make me suspicious of the entire field of technical analysis…