Lets cut to the chase
The biggest and most critical danger of technical analysis is that, after a while, it starts to show you exactly what YOU WANT to see!
In quantitative studies, there is a phenomenon where your research starts showing you what you want to see instead of what is really happening and that is known as Data Mining. Data Mining occurs most frequently when there is a huge benefit to you if the results are showing one way instead of another. This is the exact same phenomenon in technical analysis.
In technical analysis, charts start showing you what you want to see especially when you have made a mistake and needs the stock to go one way instead of another! Suddenly, the deeper you dig into the myriad of technical indicators, the more evidence you seem to find supporting your mistake, giving you the eerie confidence that your mistake is going to turn out just fine.
We all remember how that turned out, dont we?
Technical analysis is essentially a study of the various ways to interpret historical price and volume action in order to form an opinion of future direction. Because technical analysis methods have become so complex...
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