Predicting Price Movement with Technical Analysis

Technical analysis is used to measure/quantify activity and price movement in your charts and give you a basis to begin forming a potential trade idea. You need to use additional information before you enter a trade. By itself technical analysis has no reliable predictive quality. 

“I will go short when this move retraces 50%” is not based upon anything other than a gut feeling or your opinion.  There is no scientific evidence or data to back up your gut feeling.  Backtesting can help you with probabilities but there is no 100% certainty in this game.  The only certainty is that you are always operating in a condition  of uncertainty.   

You need additional information before you decide to trade. You need to put the probabilities in your favor. In the best case scenario you use repeatable patterns and conditions that you have seen over and over and only trade when these conditions are present and stay out of the market all other times.

You have to factor predatory algorithms into your analysis. Price is not moving on pure supply and demand, it is being skewed by the orders being pumped in by algos.  If you completely ignore the presence of algos you will be frustrated.  They will be stopping you out, driving price against your position frequently, and moving without you when they make the big moves.  That is what they are programmed to do and they are very effective.  

No one cannot predict when an event will happen, for example an earthquake or tsunami. You need a crystal ball to do that.  But you can predict with 100% certainty how people will react and what their likely behaviors will be.  As an example if you are in a movie theater and the fire alarm is pulled everyone will run for the nearest exit because that is what they were told to do. Once they see others running for the exit (even though they don’t see fire or smell smoke) they will follow the crowd out the door. The same is true with trading.  Learn when the crowd is going to do something and start to trade against them with the Big Boys. That is how the Big Boys make their profits everyday.  They do the same thing day in and day out, in a slightly different way to keep traders guessing.