Does technical analysis work?
The best part about TA is that it doesn’t let us go against the trend and forces us to have a stop loss. It stops us from averaging down as the price falls. If traders follow these rules, odds of doing well go up significantly.
But can the various indicators and patterns magically help determine the right time to enter or exit? My sense is probably not.
Has the trend of people who care about TA as a % of people who trade the markets increased over the last few years? I don’t think so.
I remember even in the late 2000s, everyone wanted the latest indicators on their charts. Many trading forums were dedicated to various TA strategies and studies. Even at Zerodha, queries related to charts and indicators have dropped significantly in the last few years.
Today there are maybe not more than 15 lakh daily active traders in India. A small number in the India context but they contribute over 80% of the exchange volumes. The trend among traders today seems to be to trade news and sentiment using options strategies.
By the way, some of the principles behind TA can be combined with fundamental analysis to help trade better. I shared this in a blog post a few years back.