Why Technical Analysis Is Considered Blindfolded
Why is it called blindfolding?
Because technical analysis is looking at things from only one indicator.
Not only that,
by incorporating multiple indicators on a single time frame,
it becomes complex and noisy.
Basically, analyzing the market means
looking at multiple timeframes,
but what can be used for trading
are the parts where multiple types such as scalping, day trading, and swing trading exist together.
In other words, using multiple timeframes
corresponds to a swing-oriented perspective.
So if this is
scalping or day trading,
it means using a range of 1–30 minutes.
The part that is blindfolded
is because you are trying to assess the market’s health with technical analysis.
In other words, you are analyzing with technical analysis, not with price and time of the market.
If asked whether one should use correlations extensively in analysis, I think it’s better not to use them much, for the reason that
Correlations
mean opposite trades in currencies
That is, if the yen is rising, the dollar is falling.
Market movements operate on such relationships,
even if you increase currencies, profits do not necessarily follow,
and rather, you often get noise from being misled by correlations.
If one intends to use correlations heavily
it means both yen and dollar are moving in the same direction
especially when the analysis indicates a strong trend, and only for that use.
In such market conditions
the trend is strongly manifested,
so no matter which currency you trade, your performance won’t change
you simply trade with the trend.
This is the method used in a trend strength indicator.
When several currencies show the same direction, the trend is that pronounced
so you trade in the direction of that trend.
Only in such times do I believe correlations should be used extensively.
Normally, one should not overuse them, and the currencies traded should be limited to a reasonable number.
Trend trading should be pursued only when the market is strong.
When the market trend is strong,
it is after a break of support/resistance that the move occurs.
In other words,
it is a pattern where the recent market keeps updating in a place where nothing else happens.
People often say the market has “updated,”
but that happens routinely and is only a market signal.
It is pointless to place too much importance on such things.
The break of support/resistance is also a sign of an emerging trend.
But that is merely the early signal.
It tends to reverse mid-way.
So what were we aiming for with trend trading?
In the end, it’s about trends of 100 pips or more, isn’t it?
If you look at past markets to some extent,
even after moving 60 pips, it can suddenly reverse.
Obviously, you don’t make profits trading in such places.
Trend trading is,
based on the idea that a trend market will appear, right?
A market that moves 60 pips and then retraces
generally advances quickly and retraces quickly
should this be called trend trading?
If you recognize it as trend trading,
you will quickly lean toward a range mindset.
The charm of manual trading is
not possible with automated trading
that kind of market awareness I’m talking about.
In other words,
if you aim for trend trading
you should trade with the trend you are targeting
which is a strategy to maximize profits.
As for the point of view on trends
it is about whether the price has broken out of a box.
However, this often involves false breakouts.
To deal with this,
there is no choice but to wait and confirm the trend.
If you rely only on break-entry logic,
you cannot do much about such false moves, but
by waiting for the timing, you can prevent them.
Trend trading is
built on the recognition of the trend market.
However, recognizing the trend only needs to be done once.
Whether the market is moving diagonally is all that matters.
In technical analysis terms,
it is simply moving along the MACD zero line.
With RSI, it is 50
With Williams %R, it refers to the stagnation of 20 and 80.
Trend trading is based on the culmination of these indicators.
If you are aiming for the trend in the initial move, take profits in the body.
From the outset, this initial-trend aim is for small to medium trends.
Therefore, take profits as the move progresses.
When targeting the trend from the body, aim for the tail as well.
This is because a trend is forming—the condition is a strong trend.
Naturally, the larger profits come from aiming at the body of the trend.
But large profits imply low probability of success.
Since you never know when the market will appear,
Trend trading is
body profit-taking from the initial-trend target,
and
tail profit-taking from the real trend entry in the body,
and that’s what it means.
When the market is strong,
it is a phenomenon where other currencies are moving in the same direction.
Also, in such cases,
there are times when the trend moves for a week, right?
So, basically, it is not too late to enter the trend after waiting one day.
Why is that? Because
that trend is that strong.
Trend trading is a carry-over trade, so it’s natural.
At this time,
those who hold positions
are aware of ranges and trends as well,
and wonder which way to place their trades.
Even though a trend has appeared and a day has passed,
it is not too late to trade into the trend.
That is because it is a sign of a trend.
It is around the torso or neck area of the pattern.
Therefore, if a trend appears, that trend entry will be successful.
