Technical Analysis Is a Windsock

Hello and welcome to my weekly essay and video analysing markets around the world using my technical analysis method developed over decades of involvement in the financial markets.

There will be a lot of information on offer and I’m hoping you will find this weekly update an important resource that can give you solid hints about upcoming opportunities, or warn you of troubles ahead that you should prepare yourself for.

We are going to start very slow and build up your knowledge of my approach bit by bit so you can understand what I will be discussing in my videos.

Let’s face it, the complexity of price action is truly mind boggling. Many people (perhaps including you) consider it a random walk that can’t possibly be predicted. Technical analysis generally has a pretty bad reputation due to the fact there are plenty of unscrupulous operators who don’t have a clue what they are talking about. But they know that the public has even less of a clue so they put a few lines on a chart and say something like ‘This ABC corrective wave off the trend line should see a 0.618 Fib extension to the top of the channel.’

That sounds pretty clever. So, I guess they must know what they are talking about right?  Wrong.

Did they tell you exactly where they are wrong? Probably not. Did they explain the logic behind their analysis or give you exact details of when a signal is generated? I’m guessing no, because the rule of making market predictions in the media is to keep things as ambiguous as possible so no one can pin you down at a later date and say you were wrong.

The more detailed you become in your analysis the closer you are to allowing yourself to be wrong. If you have traded the markets in the past you know that the moment you enter a trade you must deal with the very real consequences of your actions. An analyst talking in sweeping terms about where they think the market might go doesn’t have to deal with any consequences at all. If they were wrong, they can just shrug their shoulders and make another prediction. But a trader/investor doesn’t have that luxury.

You can’t put your hand up and say ‘I don’t know what I was thinking when I put that trade on, I didn’t really want to buy that many shares, can I be let off that trade, pretty please?’

If my articles are going to be of any use to you whatsoever other than a way to pass the time, I must step up and allow myself to be proven wrong. But if I am going to give you enough detail to be proven wrong you have to invest the time and energy into understanding what ‘wrong’ looks like.

That’s where technical analysis comes in. 

Technical analysis isn’t a crystal ball. It’s more like a wind sock. Giving you a sense of which way the wind is blowing. Helping you to make decisions that have clear targets and stop loss levels. Where am I right? Where am I wrong?

If you have ever placed a trade in the markets as either an investor or trader, I have a few questions for you.

Why did you make that decision? Do you even know? Was it a comment from a mate? A need to make money quickly? Hope? Greed? Do you know when you will be proven wrong? Have you even thought about that before you entered the trade or were you just counting the imaginary winnings in your head? If you used fundamental analysis were you certain you had ALL the information you needed before making the decision?

My answers to these questions involved creating a model of price action that could guide me in making decisions. I will teach you about this model so that you can understand the comments I make and hopefully in time you will see how useful my methodology is.

The first step on that road starts today with a simple video explaining why you need to start focusing on how markets change direction. Enjoy.


Murray Dawes,
Editor, Alpha Wave Trader


Murray Dawes is the Editor of Pivot Trader and contributing Editor at Money Morning. He was one of five, from 5,000 applicants, chosen for a graduate position with the Swiss Banking Corporation — now part of banking giant UBS. The bosses quickly cottoned on to his potential and pushed him up the ranks as a futures broker on the floors of the Sydney Futures Exchange. Murray later broke out on his own and developed custom trading systems to trade leveraged financial instruments like futures. Due to his success, Murray became the ‘hired gun’ trader for Australia’s rich and famous. Today, Murray runs a trading service through Fat Tail Investment Research to help everyday Aussie investors use his advanced trading methods.

Money Morning Australia