Under which circumstances "Technical analysis" does not work ?
I am sure if you ask any Decent qualified "Technical analyst" which conditions they fear the most, you would most probably hear them say “When market is Range-bound”.
In case of news and events there is un-certainity, it may not work in those situations as-well.
The simple logic behind it is that a "Trending market" is visible and people know “What to do”.
- Buy the corrections in an Up-trend.
- Sell the rises in a Down-trend.
No rocket science there.
However,
when the market is "Range-bound", one cannot simply understand what to do.
People try to "Sell" and market starts going up, people "Buy" and market goes down.
One can "Sell" when market turns down from the range top and "Buy" when market turns up from the range low but doing so is not as easy as it sounds.
It can keep on happening for months or a few years in extreme cases.
So what does one do ?
- Look for Internal patterns in that range.
- If the range is very narrow in terms of percentage movement it is best to avoid trading.
The problem with using Indicators alone in this type of market is that you will mostly get mixed signals and hardly make some money that too if you are either lucky or smart to understand what is going on.
To connect with us for "Free", you can checkout the links below :
