Technical Analysis is to Trading what Astrology is to Science

TL:DR - Always be wary of “crypto-gurus” and their hocus-pocus TA.

Many years ago, some great men looked at the sky and thought to themselves: ”I see an Aquarius! I see a Taurus! I see a Sagittarius!”.

Now imagine that you had a technique to perfectly predict price movements when looking at the following:

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Can you see the shapes?

Then you would always buy low and sell high. And by doing that you would alter the market ever so slightly.

Now imagine that everyone knew your TA, then everyone would buy at the low and sell at the high. But now it’s a competition. You’ll have to sell just before the high so you can sell before the crowd jumps in. But everyone is going to do that. Same for the lows.

Thereby invalidating the TA.

Thus there are two main ways to make money off of TA.

1. You find an indicator that nobody knows yet. But it is an arms race so you will only have that indicator for yourself for a short time before it gets invalidated.
2. You create a following and get them to move as one in a way you can exploit.

Eliminating option 1 as being extremely unlikely, it leaves us with option 2. Why does this work? Simple. Most people suck at math, and our brains love patterns.

If people suck at math, how can we expect them to understand the most intricate details of the crypto market (or any market, for that matter)? And here comes Technical Analysis. Any self proclaimed crypto-guru can understand the concept of moving averages, oscillators, bands or whatever it is they’re using. Even if they don’t know how a moving average is calculated, most programs do it for them today. Click a button and bam, moving averages appear.

And patterns are even more simple. You don’t even need to know what an “average” is. You just look at a chart and pretend to see stuff that doesn’t exist.

Technical analysis is easy to sell. No matter the crypto, you can usually find a combination of “technical analysis indicators” that would have been true over a given period of time. This makes trading look like a piece of cake: just follow a few rules and that’s it, you’ll beat the market. BTC falls below its 200-day moving average? Sell. RSI is too low? Buy. A triangle is forming? If it breaks out of it on the upper side, buy, down side, sell!

As long as you can click a button, you can apply technical analysis.

There is a reason Warren Buffett famously said “Time in the market beats timing the market”. Hardly any trader (and I dare say no trader) will beat the market on a risk-adjusted basis for an extended period of time using Technical Analysis.

This doesn’t mean Technical Analysis won’t work in the short term. You could very well go to the casino tomorrow with a “system” to beat the house at the blackjack game and 5x your money. You could very well repeat your performance for two, three, four, maybe even five days in a row. At this point, you would probably believe your system is working. But just because you got lucky a few times in a row doesn’t mean you (or anyone) found something valid. At this point we all probably know someone who wiped off 90% of their portfolio in 2 days because “the technicals worked before” (I’m looking at myself here as well).

The bottom line here is: Making money trading is difficult, stressful, and requires an extreme amount of work. Period.

Anyone telling you different or trying to shill you their TA is full of shit and is probably out to make money off of you. Don’t trust tiktok moon-boys and their colourful charts simply because they have thousands of followers. Don’t trust YouTube idiots with their flashy TA and clickbait thumbnails simply because they get millions of views. No matter what they say - they do not have your best interests in mind.

If you read this far, good job! Trading can be fun. But trading can be dangerous. Don’t play with more than you can afford to loose, or are comfortable to lose. Chances are, you will get rekt.

Edit: as u/infested33 pointed out - TA can sometimes work as a self-fulfilling prophecy. In that case, as he says, it can have some merit in “predicting” swings in the market.