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Chapter 8. The advanced futures trading ... > Why technical analysis makes sense

Why technical analysis makes sense

Some pure fundamentalists dismiss technicians as merely “chartists,” insinuating that technical analysis is black magic. I should point out that charts are an integral part of most sciences, from engineering to medicine. The reasons that technical analysis makes sense are fourfold:

  1. “Footprints in the sand”—the smart money (who are generally the big players, because they are the ones making the money) cannot hide. They might be better informed, but their buying or selling has to show up in price, volume, and open interest.

  2. The market discounts all fundamentals in price.

  3. History does repeat, and if you don't learn from it, you are bound to fail.

  4. Markets do move in trends, and these trends are more likely to continue than not. In the next two chapters, I will delve into a technical method I use for determining and then profiting from trends.


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