As a newbie trader myself, I think I can shed a lot of light on this.
There’s something very, very attractive about the idea of taking something close to random (even if it’s weighted and possibly predictable) and running a bunch of mathematical formulas to make it understandable, accessible and predictable. A quirk of human nature, possibly. Seems so complicated in the beginning, with a simple, human readable result. The perceived elegance is quite impressive.
That said, there’s also the fact that for those of us who haven’t traded or been in the industry at all, that if we say “I want to learn to trade!” Technicals are much easier to find simple, beginner information on, and learning TA feels MUCH more akin to learning a new skill, whereas Fundamental analysis is more akin to “pay a lot more attention learn a lot more and be smarter.”
Kinda like how somebody who hasn’t really worked out much in the past is much more likely to be drawn to stuff like fad diets, P90X, (or 8 minute abs,) specific books, programs, whatever. And truth be told, some of these people drawn to the specifics if they apply themselves dilligently to these programs can show great results. Lots of these programs work, and are based on fundamentally sound principles. It can be a great entry to the world of fitness. Most will fail simply because they don’t care that much and don’t stick to it, and they never get past the “do what the p90x guy tells me” part, to the part where they realize why they’re doing it and why it works. I myself do not stay in impeccable shape despite working out regularly and eating fairly healthily, because I have a soft spot for beer and cheap whiskey. But at least I know exactly what I’m doing wrong (or, exactly what I’m doing right, depending on your point of view)
This post probably sounds like I’m bashing technical analysis. I’m not; it seems plenty of successful traders use it in a very in depth manner. (I say seems, because I’m a newbie myself and truth be told I don’t know crap)
Quite simply, though this may not have been the case up until relatively recently, with the proliferation of computerized trading platforms, the internet, etc. Technical Analysis is just way, way, way, way, way, way, way, way accessible these days, where a few clicks can take care of math that used to take very smart people days. That’s pretty awesome. Personally it makes me feel like some sort of robotic superhero.
But the MAIN point is thus. There’s two general options we have. They usually go like this:
A) “Look at this USD/CHF chart, over the past two days there’s support and resistance here, a general uptrend, the RSI shows that it’s oversold so I’ll put in a buy order down here and play the bounce off support”
or
B)“Well, look at this USD/CHF chart; it looks like it’s been moving upwards recently. I guess it’s time to give myself a thorough education in the past few decades of economic policies of both the United States and Switzerland and see how these different aspects of policy affected the exchange rates. I hope I remember where my library card is. Or where the library even is. Didn’t they move it recently? Like a few years ago. I swear they moved it… yeah, they built a new library, right by that mexican place I used to go to with Jenny. Fernando’s? Man I kinda miss Jenny, she had such huge- Rodrigo’s?? What was it called… not gonzales was it? No, I’m thinking of that cartoon mouse, oh boy he was fast, but, thinking back he was kind of a racist character, it’s funny that back then they didn’t care about being a little racist. Strange how times have cha— OH Pedro’s! That’s what it’s called! Man I could go for a Pedro’s taco right now!”
