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The answer is simple: Technical Analysis works but not necessarily for the reason most people believe. By doing so, they will drive the price of that stock lower and that will prompt some traders to start short selling that stock in anticipation of further decline.

Prices continue the downward trend, forcing traders who were long on that stock to sell their positions because it is going below their stop limits.

Technical group theory describes different ways of predicting the future of the stock market based on its history. Unfortunately, technical airing is not an exact science. Many prominent scientists label it as "voodoo science". They advance that due to market efficiency, if you use TA to find your entry positions, you’re no top off than someone who chooses those positions randomly. Market efficiency means that all the to be had information is ere strategic in the stock prices, and that you can only guess how will the price function in the future.

The "voodoo science" theory would make sense if it wasn’t for the fact that there is a significant number of traders who are able to consistently make profits in the stock market. These traders use technical line geometry as their main tool. Since any trader has or can have pass to the same TA tools we have to ask how can small group of traders consistently win and the other larger group, more or less consistently lose in the stock market game.What is it that winning traders know everywhere technical graphic algebra that gives them the upper hand?

The jury-rig is simple: Technical mere theory works but not necessarily for the reason most people believe. Many successful traders don’t want to share this secret. TA works insomuch as many people use it, and successful traders are able to predict how other people will react on the different TA indicators and signals. In other words, while the losing traders are using TA to determine their trades, the winning traders are winning inasmuch as they know how the losers are going to react based on this data. For example, when a stock price goes under one of the key exponential moving averages, (EMA’s) many investors sell that stock to protect themselves in order to unessential losses. By doing so, they will drive the price of that stock lower and that will prompt some traders to start short selling that stock in antedate of further decline.

Prices continue the downward trend, forcing traders who were long on that stock to sell their positions seeing it is going since their stop limits. This creates a domino effect as the price continues to decline. However, at this point, successful traders realize that most of the current price game was created artificially. They start to enter positions on the buy side and more often than not price starts to reverse. The losing traders have then as previously sold their stock based on the TA tools. The winning traders buy the stock whereas they understand that the fluctuation was temporary, and they seize the opportunity based on the losing trader’s reactions.

No TA tool by itself will give you reliable buy or sell signals. There is no holy grail or magic abominable box that will give you the perfect, all right signal. However, the coincident of the right group of TA indicators with discipline and admissible trading star has been the road to fortune for many traders. There is no reason why you cannot emulate their success.

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