How Does Technical Analysis Work?

Welcome to DTS Answers for the question, how does technical analysis work?

It’s a great question. A lot of things in trading are not common sense. If you ask Google or AI, you’re going to get very foggy answers. The answer I’m about to tell you is the one that you need to understand in order to use technical analysis to make money.

My definition is very simple. It’s the understanding of the interaction between bulls and bears across the four timeframes that matter for whatever timeframe you are trading. Naturally, those four timeframes will vary depending upon the timeframe you are actually trading. This is how you get high odds in trading.

It’s somewhat analogous to the battle that occurs on a football field or on a battlefield from years ago. Think about this. There are only a finite number of people and only a finite number of people who would ever be involved in a single stock. If everyone who wanted to sell that stock already sold it, could it go any lower?

That’s the beginning of understanding technical analysis. It may sound cryptic, but it is how you read a chart.

There are no magic strategies, and there are absolutely no technical indicators that will ever make you money. If there was one that ever worked or was valuable, I would use it myself. I’ve asked people for many years to show me one that works, and I’ve never been proven wrong.

At DTS, I call it the language of charts—learning how to read a chart like you would learn a foreign language.

For more resources on this, unfortunately, I have to refer you to the whole DTS Free Stuff page because there’s no one specific article. It’s understanding all the great stuff that’s there.

And for the best useful free trading information anywhere, be sure to become a DTS free member and also visit the DTS Free Stuff page.

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