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Do Successful Traders Use Technical Analysis?

Mon Jun 07 2021 15:28
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Beginners always try to copy successful traders to follow the same path to success. But do you know anything about the reality of successful traders and their trading tactics? If we take up a single topic of technical analysis, there are many opinions. A majority of successful traders use technical analysis. 

But many traders don't even take a look at technical analysis before they trade. So what is the actual reality? So here in this post, we will discuss whether successful traders use technical analysis or not. We will discuss whether you need to use technical analysis or not. 

Whether you are a beginner or an advanced trader. We will help you to decide whether you should use technical analysis or not. So, without wasting any time, let's get into this post. 

Know Technical Analysis In-Depth 

There are a lot of myths associated with technical analysis in the trading market. Most of the people believe in these myths and they do not uncover the reality. But the reality is far from the myths. There are myths like technical analysis is a very simple process and you can guarantee success. 

Even using different software of automation bots for technical analysis needs practice. Believe us, there is no guaranteed success when you use technical analysis. So the first thing you need to know is to study what technical analysis is. 

Basic Definition 

Let's start with the basic definition of technical analysis. It states that technical analysis is a process where we select an asset and collect its historical data. The historical data includes volume and price to compare or relate it to the current time frame. 

There are various indicators to compare and relate the historical data with the current time to get an idea of what the coming trend or market sentiment will be. 

This is what all the trading courses, trading books, magazines and experts will explain to you when you are looking for the definition of technical analysis. 

Different From Fundamental Analysis 

It is worth mentioning that fundamental analysis is completely different from technical analysis. Technical analysis vs fundamental analysis is one of the most discussed topics in the trading community. A large group of traders use fundamental analysis and a large group rely on technical analysis.

The Big Question: Technical Analysis Is Important Or Not? 

Now let's get to the big question that new traders always ask, whether technical analysis is important or not? They want to know the clear answer because they are willing to choose technical analysis for their trading journey. 

This is the reason why they always ask the same question. Let's take a look at some different or opposing opinions on this topic. 

It Is Used By Many Successful Traders 

If we ask whether technical analysis is important or not, the first answer you will get is that many successful traders use it. They have been using technical analysis for their trading for years and they are still using it. They will continue to use it in the future. So there is no doubt that many successful traders rely on technical analysis.

Many Traders Succeed Without Using It 

But hearing one side of the story is not fair. The other side of the story is that many successful traders don't even look at technical analysis. 

There are thousands of stock, equity and forex traders who have been successful in various markets without even using technical analysis. It is important to keep this in mind while deciding whether you should work with technical analysis or something else. 

Understand With Two Different Case Studies 

If your thoughts about the process of technical analysis are still not clear, then you need to understand it with two different case studies. We are here with these two different case studies of two successful traders. 

We will find out how they were successful and what they think about different trading techniques. It will help you to find out whether technical analysis is important or not. 

#1. Jason Perl, Successful Trader Who Uses Technical Analysis 

Jason Perl is not an investor, but he is a trading manager for many successful investors and fund management companies. Jason Perl is successful and he uses technical analysis. Many times he has encouraged new traders to use technical analysis through his publications.

#2. Jim Roger, Successful Trader Who Never Used Technical Analysis 

In Schwager's Market Wizards book he is called one of the most successful traders of all time Jim Roger has a different story than Jason Perl. 

Jim Roger has spent most of his time trading commodities. But the best part of his trading career is that he never used technical analysis. He was among the most successful traders in the period from 1970 to 1990.

What's The Point? 

The point is quite clear that using technical analysis will not ruin your trading career. But it's also not established that using technical analysis will make you right overnight. 

Whether you use technical analysis or not, you must always keep these two sides of the story in mind. You should look at technical analysis as a way to make your trading actions more accurate. But you should not rely completely on technical analysis. 

What Should Your Approach With Technical Analysis? 

Still, many new traders find themselves in dubious situations. Are they confused about how to proceed with technical analysis? What they should do next? Whether they should start technical analysis or ignore it? Before you make a decision, ask yourself the following questions.

Figure Out Trading Style 

Try to find out your trading style, trading behavior and many other things that will help you decide whether technical analysis is the right option for you or not.

See If It Sounds Easy For You 

If you find that technical analysis is much more complex than your understanding, then you should not use it. There are several resources available online to learn technical analysis.

See If It Works For You In A Test 

You can also do a test by demo trading or even during live trading to see if technical analysis works for you. If it does not work, then you can stop using it. Try out which strategies work in your favor and keep practicing them.

The Final Thought 

The choice of technical analysis for your trading career depends only on you. It doesn't matter if successful traders use it or not. If you find it useful for your trading portfolio to add technical analysis to your trading toolkit, then it's great to work with. But if you feel that it is hard to be successful with technical analysis, then you can always leave it alone. 

But, if you take a survey of global traders on technical analysis, then there is a mix of opinions. Many traders use it and get a good return on investment. But many successful traders have not even touched technical analysis in their entire career. So it depends on a trader, his skills and goals whether he needs technical analysis or not.
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