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Is Technical Analysis Relevant In Today's Stock Market?

Mon Jun 07 2021 13:46
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People have a lot of questions about technical analysis and how it relates to today's stock market. There are hundreds of questions and thousands of answers on various forums. Do you think technical analysis is still relevant? Or do you think technical analysis is an outdated approach to today's stock market. 

There can be many opinions, but there is only one reality. So what is the reality? A large number of traders use technical analysis. There are many chapters dedicated to technical analysis in trading books. 

There are even some manuals written about technical analysis in the stock market. Yet, in this arena of the internet, there is a topic of discussion that questions technical analysis.

The relevance of Technical Analysis 

There are some traders who claim that technical analysis is useless. They think that it is not an effective way to analyze stocks or other assets. 

According to these claims, current market sentiments are unpredictable and irrelevant to historical events. And historical events, data and patterns are the key elements of technical analysis. That is the reason why this issue has been raised against technical analysis. 

So let's find more information on this topic. 

We will discuss three major points of Technical Analysis: 

  • Point #1: Why technical analysis seems irrelevant to the current market? 
  • Point #2: Is it irrelevant to the current stock market? 
  • Point #3: What if it becomes irrelevant to the current market? 

Point #1: Why It Seems Irrelevant To The Current Market? 

In this first point of this post, we will discuss the relationship of technical analysis with the current stock market and why it seems to be irrelevant. We are not saying that it seems to be irrelevant. But we will find out why there are questions about the relationship of technical analysis with the current market. 

Why are there so many questions about this relationship? Why does it seem like an irrelevant thing to the current market environment? There are a number of reasons why. But the following are some of the most common reasons. The most important thing is that we need to understand all these reasons mentioned below. 

The Story of Myths 

Myths have ruined the credibility of technical analysis. There are many reasons why it has lost its credibility. The sad thing is that many traders have stopped using technical analysis because of these myths. 

And the worst thing is that many traders have not even tried to use technical analysis. And again, it is because of some myths that are spread in the market about technical analysis.

More Failure Cases 

There are failure stories related to technical analysis. Very few traders are successful with technical analysis. No matter what market you are dealing with. If you don't use it in the right way, you will fail. And if a strategy fails in most cases, more doubts will arise.

Complexity 

Technical analysis is not easy and it is not the cup of tea that everyone enjoys. Many traders do not fully understand it before they apply it. That's the reason why they don't get the benefit of it. And at the end of the day, they think that technical analysis is not even relevant to the current stock market.

Less Recommended 

Technical analysis is one of the least recommended trading strategies by experienced traders. You will never see a beginner being recommended to use technical analysis. 

Not even advanced traders get such a recommendation to use technical analysis. This is the reason why a large portion of traders believe that it is 

Low Success Rate 

Low success rate is also a big problem for technical analysis. That is the reason why most traders believe that it is not relevant for today's stock market.

Unpredictable Market Environment 

The current market environment is considered unpredictable. This is because nowadays there are many social, economic and financial factors that affect the stock market. Therefore, some traders believe that technical analysis is irrelevant to the current market environment. This is because technical analysis is one of the oldest analysis techniques.

Point #2: Is It Irrelevant To The Current Market? 

Now the second point is important and also contains the main question of this topic. Is technical analysis relevant to today's stock market? That is the real question that we are exploring in this post. But, the answer to this question is no. 

Technical analysis is relevant to today's market situation. If you don't believe it, the following are some of the reasons why technical analysis is still relevant to the current market situation.

First Choice Of Some Traders 

Nevertheless, technical analysis is the first choice for some traders when it comes to analyzing stocks. We discuss its relationship to current stock market scenarios here. But some stock traders use technical analysis in practical life to analyze stocks. 

Still In Use 

If technical analysis is irrelevant to today's stock market, why is it still used? Yes, it is used by many traders, and that is the answer to our question. It is clear that technical analysis is still in use and it is related to the stock market.

New Technologies 

Every day new technologies are introduced that are related to technical analysis. Software to bots, different and new technologies offer technical analysis as part of them. 

Many websites and trading exchanges offer automated technical analysis. So, it is not a question of non-existence of technical analysis. 

Point #3: What If It Becomes Irrelevant? 

The last point of discussion is what if technical analysis becomes irrelevant to the stock market. There will be so many changes in the life of the stock trader who uses technical analysis. 

There will also be many changes in the market. Below are some changes that may occur if the use of technical analysis comes to an end in the future. 

Market Will Be Left With One Option 

Fundamental analysis will be the only option left for traders to analyze stocks or other assets. There will also be new methods of analysis. But according to the current time frame, fundamental analysis will be the only option left.

No More Theories & Discussions 

There will be no more theories and discussions on technical analysis. Currently, there are many theories that have been developed to help traders with technical analysis. 

Many trading books and journals talk about technical analysis. But when technical analysis becomes irrelevant to the stock market, there will be no more such theories. 

Summary 

We can't say that technical analysis is irrelevant to today's stock market. But we can say that there are many changes in the stock market in recent years. These changes have made technical analysis less effective. But that doesn't mean that technical analysis is no longer useful. 

There are still many advantages that technical analysis offers. It helps traders get an idea about the trend. It provides early trading signals that help traders make accurate and profitable decisions. But still many traders believe that technical analysis is not useful. 

It is useful for the traders who use it and they will use it in the long run. If you don't use it properly, then you might have problems getting any benefit from it.
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