Sarah Parker Posted October 10, 2020 Share Posted October 10, 2020 Hi, I would like to know the limitations of technical analysis. Quote Link to comment Share on other sites More sharing options...
0 Brad Vitello Posted October 10, 2020 Share Posted October 10, 2020 Hello, thank you for asking! Despite being the most popular mean of analysis used in trading society, technical analysis suffers from certain drawbacks and other deficiencies. The first and most common criticism of technical analysis is the broad input of data, without thorough data research and relying only on two aspects to provide correct input which will be used for prediction of price and volume of a certain stock. The second criticism of technical analysis is a heavy reliance on historical patterns, and expectation that these patterns will repeat every time, in case of non-repetition, predictions fail and may incur heavy losses upon investors. The third criticism is derived from the second one, where many traders will place stop-loss orders according to these historical patterns, and when the stock reaches limits that trigger it, there will be a high selling pressure which will further push the stock down and lower its value. So, these orders and traders’ movements may bear a negative effect on stock value in the short and long term. If the trend is downwards facing, it will further devalue the stock and cause huge losses. Quote Link to comment Share on other sites More sharing options...
0 Rishabh Tyagi Posted June 24, 2023 Share Posted June 24, 2023 (edited) Limited consideration of fundamental factors. Historical data may not predict future outcomes. Subjectivity in interpretation. Potential for false signals and noise. Inability to predict major market events. Lagging nature of some indicators. Edited June 24, 2023 by Rishabh Tyagi Quote Link to comment Share on other sites More sharing options...
Question
Sarah Parker
Hi, I would like to know the limitations of technical analysis.
Link to comment
Share on other sites
2 answers to this question
Recommended Posts
Join the conversation
You can post now and register later. To reply to this question, sign in or create a new account.