Let’s look at the benefits of being a Technical Analysis Trader. Firstly, let’s define what we mean by “technical” as opposed to “fundamental” analysis. Put simply, fundamental analysts take huge amounts of information and data that they analyse in order to make their trading decisions, whereas technical analysts look directly at charts and identify patterns that inform their trading decisions.
At Trading College we are TECHNICAL ANALYSIS (TA) traders, and here are the top five reasons why!
1. A Picture is Worth 1000 Words
Human beings tend to process more information from looking at a picture of something rather than having the concept explained in words. The markets are hard to read and predict so there’s a huge advantage to having a visual, pictorial representation of activity over having rows of text and figures that require interpretation. Obviously it takes time and practice to “read” these pictures (charts) accurately, but once we get a good understanding of what the patterns we see mean, we have a fantastic RESOURCE that allows us to react instantly to real-time activity in the markets and maximise our chances to make profit.
2. A TEAM OF TWO: YOU AND YOUR DEVICE
One of the greatest advantages of being a Technical Trader is that, once you’ve done your training, all you need is YOU and YOUR ELECTRONIC DEVICE (computer, laptop, tablet or phone) to access your chart package and trading account. You don’t need a whole team of people processing information for you, or any fancy and expensive resources. In any case, you have to question the advantage of having a team of people all analysing and interpreting different bits of information. As we know, the markets are unpredictable as it is, do we really want another filter of human distortion between us and the raw data?
3. BETTER RISK CONTROL
Because, as TA traders, we can look directly at real-time pictorial representations of raw data, we can READ THE SENTIMENT in the market faster than a fundamental analyst can. For example, if you’re long in the market and we start pushing below historical lows, you can instantly see sentiment in the market is to the downside (i.e. there are more sellers than buyers). You can react accordingly and manage your risk. A fundamental trader cannot see this picture instantly. They need to do a great deal of analysis first, which takes time… time that could be eating into their profits.
4. STAYING AHEAD OF THE GAME
As a TA trader, you always stay ahead of the game, because you are always trading in REAL TIME. You can respond to movements in the market instantly; you don’t have to wait for data or disclosures because all responses to these are already factored into the charts. You can trade in between news releases as the market discounts everything; a fundamental trader has to wait to receive information to analyse. TA traders can trade all the time and (with a device, a chart package and Internet access) at any time. We can fit trading around our busy lives (a 9-5 job, running a business or household, etc.). We have ultimate flexibility.
5. TECHNICAL ANALYSIS IS FUN!
Watching the markets in real time, looking for impulsive bullish and bearish movements, for emerging patters, for sentiment and trends, is fascinating. It’s like watching a living, breathing thing. It’s almost like (to be topical for the time of year) hunting for Easter Eggs as a child; the joy of finding that beautifully patterned object is a real thrill! And when the market reacts to the patterns you find in the way you thought, and your technical analysis pays off and is reflected in your overall profits, it’s a great feeling of ELATION and SATISFACTION.
Ultimately, being a TA trader gives you FLEXIBILITY and ACCESSIBILITY. All you need is a half decent computer, a good chart package, a sound education and a bit of capital in order to start your trading journey. Once you’ve completed your training, you can trade at any time, anywhere, as long as you have Internet access. And when you become proficient at trading using technical analysis, you don’t need to spend all day doing it; you can set up all your trades relatively quickly because all the information you need is right in front of you. But you do need to invest in some decent training first, which is why getting a SOUND EDUCATION is still always key to your trading success!