I always wonder if there are any disadvantages to using technical analysis.
Like any method or strategy, technical analysis alone has its strengths and weaknesses. And it is used for set up and entry. After entering a trade, unless you use a set and forget automated exit point(s), it is sometimes more important to manage the trade than concentrate only on the initial technical analysis.
Here are some commonly cited disadvantages of technical analysis:
- Self-fulfilling Prophecies: Some critics argue that certain patterns and signals become self-fulfilling. If a large number of traders believe a specific technical signal suggests an upcoming price movement and act on that belief, it can cause the predicted movement to occur, regardless of underlying fundamentals.
- Lack of Fundamental Consideration: Technical analysis looks at the market’s past behaviour and does not typically consider underlying economic, financial, and other qualitative or quantitative factors. As a result, an investor may miss broader economic changes or company-specific news that might affect the stock price.
- Not Always Consistent: The same chart can often be interpreted in different ways by different analysts. One technician might see a “head and shoulders” pattern indicating a reversal, while another might interpret it differently. This subjectivity can lead to inconsistent outcomes.
- Data Mining Bias: With a vast array of technical indicators available, there’s a risk of “data mining,” which involves retrospectively searching through charts for patterns and then mistakenly assuming that these patterns will predict future movements.
- Lags: Certain technical indicators are lagging, meaning they only confirm a trend once it has begun. This can lead to missed opportunities or late entries into trades.
- Doesn’t Work in All Markets: In some illiquid or less developed markets, technical analysis may be less effective due to lower trading volumes or manipulative trading practices.
- Price Gaps: Unexpected news can result in price gaps which can disrupt technical patterns and invalidate predictions.
- False Signals: Technical analysis can produce false signals, indicating a move that doesn’t materialize. This can lead to losses if a trader relies solely on technical signals without considering other information.
- Over-reliance: Solely relying on technical analysis without considering other methodologies can lead to a narrow perspective of the market.
- Requires Continuous Monitoring: For certain short-term trading strategies based on technical analysis, continuous monitoring of markets may be required. This can be time-consuming and might not be suitable for everyone.
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I think @Mondeoman perfectly captured the different shortcomings of technical analysis. Couldn’t have said it better. 
But I guess I just wanted to chime in and say that it’s only natural that this type of analysis has its flaws, which is why it might help to use it alongside the other types of analyses, particularly fundamental.
Although definitely valid! I haven’t really given this much thought in the past. 