Are You Forcing Your Technical Analysis?
May 14, 2016
3 Min Read
A lot of traders use chart analysis as a safety blanket. Rather than trying to become a better trader, they think that if they learn more ways of analysing the markets, they'll get better results.It's their insurance; just because they have a major significant level near the price, they think their trade is guaranteed.The problem is... even if you have perfect analysis, the unexpected can always happen. Trading is about probabilities, not about being correct 100% of the time.However, sometimes the charts just look like a mess before you've even done your analysis. During those times, I see a lot of traders behaving like my niece (she's 18 months old!).[caption id="attachment_5440" align="aligncenter" width="300"]
Here she is, sweet and innocent![/caption]She has one of those toys that everyone had as a kid; where you have to match a shape to the correct shaped hole. Sometimes she has trouble matching the right shapes. But rather than giving up, she's figured out a solution...She noticed that the circle shape will fit in the square, rectangle AND the circle hole. That means she has 3 opportunities to put the circle shape through a hole.It isn't correct but it fits. To her it looks fine.And this is exactly what a lot of traders do too...When the markets are a mess, it would be a good idea to be patient and wait for better structure to form in the market movements. But a lot of traders don't do that. Instead, they move their tools around and compromise on their effectiveness until they find something that fits and allows them to open a trade.Can you imagine what happens to traders who use the same strategy as a toddler? It's not a pleasant outcome.