Technical analysis is bullshit.
Initially posted on lifestylemaniacs.com
I learned from my own experience that trading is bullshit. Why? Because of these two laws of the stock market.
Trading relies on technical analysis to predict the market. 90% of traders who rely on technical analysis lose money, according to Bill Williams.
Have you seen The Wolf Of Wallstreet? The character played by Matthew McConaughey said:
“No one can predict if the stock market is going up, down, sideways, or in frickin circles.”
If you are one of the 10% traders who makes profit long term, good for you. For me and the other 90% of traders doesn’t work. So what should we do instead? We should cleverly invest long-term.
We should research in advance of any investment initially. Afterward, we must buy and hold for at least 3–5 years. We must also periodically analyze each investment to be sure it is still a good investment.
Why hold for years? Here’s why:
We have seen through time that recessions occur. It is not a question of if, but rather a question of when. Unfortunately, we can never predict when a stock market will crash.
Just look at the stock and real estate market now during the pandemic. The government prints trillions of dollars and euros, unemployment is going up, money does no longer circulate because people stay at home, but the stock and real market are going up.
Check this video from Ray Dalio on How the economy works. He explains how the economy works and why we are in a new great depression.
Recessions occur every few decades that cause the stock market to crash and come back only after 3–5 years.
It is the reason for holding for at least 3–5 years. In case of a crash, the market will have time to bounce back, and you won’t be at a loss.
The S&P, Dow Jones, and Nasdaq have always crashed but always came back stronger than ever. By the way, check my article on the S&P 500.
If we look at the historical charts of good stocks and indexes, they always had periods of lows, but then came back higher than ever. We need to accepts that crashes and bubbles are commonalities of the stock market.
Even the crypto markets have periods of going up, crashing, then coming back stronger than ever. For crypto, these periods come every four years during halvings. It means 2021 is a bull run for crypto, but this is a story for another article.
The takeaway is to stop listening to experts who say to buy now, sell now, go short, go long, or whatever. Now you know that you can’t predict asset movements based on technical analysis.
Of course, you can predict if an asset goes up long term based on scientific research. What you can’t predict is short temporary moves based on technical analysis.
- Research an asset to find if it has the potential to grow;
- Buy and asset if not overvalued. Don’t emotionally buy because of fear of missing out based on hype (FOMO). For instance, don’t buy Tesla now;
- During market crashes, buy more, don’t sell. You can use Dollar-Cost Averaging (DCA) to periodically buy small amounts than to buy high amounts at once;
- Hold it for at least three years, and re-analyze annually your investment (is it still a good investment?);
- Sell if the investment has run its course.
If you found this article useful, give it some claps and share it with your friends. You can leave a comment on what you would like for me to write in the future. Also, how can I improve? I would appreciate it very much.