Technical Analysis is not real?
Hey guys,
So i'm in an investing discord mainly focused on crypto. A lot of these guys post calls with Technical Analysis & I have a hard time understanding how they read/determine the graphs to make informed decisions. They seem to be able to make proper investment decisions by ignoring any fundamental analysis and simply investing based on what the graph's/candles are SUPPOSED to do or are in theory going to end up doing.
I am a sophomore in undergrad trying to learn as much as possible so bare with my lack of knowledge at this point haha. Over my freshman summer, I did an internship at Bloomberg doing market research with a little trading involved. I was told by my superior that technical analysis is "not real" and to only focus on a fundamental analysis; checking things like P/E Ratio, Supply Chain, etc.
Anyone in S&T or with expertise in day-trading care to chime in? Should I invest a lot of my time to be able to do a proper technical analysis on my own? And where can I get the proper resources to learn the right way? I have no idea where to start when it comes to these YT videos.
My endgame goal is to land a FT job in ECM @ IB or Equity Research.
Thanks ahead of time, as always! +SB to all whom can chime in.
I was taught the same way you were in regards to investment analysis. Fundamental Analysis provides you with a better understanding of the "why" behind the stocks growth/decline. Technical Analysis relies on looking at charts and judging by peaks and valleys (this is a very simple description) to determine when to buy, sell or hold.
In my opinion, I'm not sure how you could perform even a technical analysis on cryptocurrency as they seem to just explode (up or down) for no valid reason, with the exception of bad news in regards to regulation. I think your friends on this call are trying very hard to sound like investors because they have bought in hook, line and sinker into this crypto fad.
"looking to break final resistance"
"short dip here to previous support"
This is the equivalent of a consultant saying synergistic. These are all buzz phrases that have no substance. Like LReed said below, there are books that rip on technical analysis but these guys are still employed by banks. That may just come down to the bank wanting to make sure they cover every aspect of trading possible. The simple truth with bitcoin is if you bought it low and held it, you have some pretty sweet gains. No technical analysis could have told you it's value would explode and neither could any fundamental analysis. You essentially won the lottery.
TLDR: S&T guy, don't believe in TA, but still use it because I want to keep my job. Free stuff is free for a reason.
I'm in S&T and we employ people who sit at their desk drawing trend lines, moving averages, RSI and that shit. Do I believe in it? No. Do I use it? Yes, more than I want to.
I think the main reason people look at technical analysis is because it's easy to understand - ie. easy to sell. If I had to explain the fundamentals to all my clients I would be on the phone all day explaining why stock XYZ is a good buy. Most of my calls are shorter than 90 seconds so my pitch will look like this: present XYZ, looks oversold (insert political case of why investors are selling now), tell them that fundamentals are looking stronger than ever and how these fundamentals have materialized in the form of a "strong underlying trend". This is way easier than walking them through statistics when most can't even explain basic terminology.
Another reason why it's being used, atleast in my shop, is because all the MDs are in their late 40s and 50s. They come from a time when markets weren't as efficient as they are today and when it might have been possible to make a profit using TA-strategies. Two of our MDs used to earn millions using TA and now everyone under them uses some of their practices because that's what we're told to do. In the end of the day, MDs call the shots and I have no plan walking into a corner office to tell them their life's work is worthless.
As a general comment - any analysis you can do on your mum's iPad for free, using fucking Yahoo Finance, can't be of much value...
I've been trading for quite a few years and I use a combination of both technical and fundamental analysis, but the TA is almost strictly utilized to determine good entry/exit points. That's on a personal investing level. As I believe was mentioned in the thread somewhere, TA, with the use of the Bollinger bands, RSI, candlestick formations which gives one the ability to see head-and-shoulder, cup-and-handle, or other formations that signal bullish/bearish reversals are much easier to see graphically, when presenting to clients.
One slide commonly used in presenting to clients in my field of work is to use dispersion modeling across a bell curve, showing Standard Deviation and associated beta with various portfolios using Monte Carlo simulations with varying degrees of beta across different asset classes (or individual equities, depending on clientele). I supplement the dispersion modeling with the results of the graphing that the TA provides.
HNW and UHNW individuals aren't concerned with entry or exit points, TA vs FA, asset classes or anything else, usually. The majority just want to know that you are making their money work as hard for them as they work for their money.