Is there even a difference between technical analysis and technical indicators? Does the use of one lead to the other?

The answer to the first question is, yes there is a difference but most don’t bother to understand it. The answer to the second is, kind of, but it’s the proper use of one that leads to the other. To elaborate, you may understand several technical indicators but that doesn’t mean you’re capable of using the knowledge to understand market movements. While I can’t speak for you, I’m only trying to determine market movements with my analysis.

Lets attempt to understand the primary differences between technical analysis and the use of technical indicators.

There are two points I wish to make;

  1. Technical analysis is possible without any technical indicator.

  2. Technical indicators are useless without technical analysis.

First, and quite simply, price is the best way to analyze any market. If price can’t be used alone, without indicators, then learning about price analysis would be my first suggestion and indicators left for another day. Technical indicators will only compound the already confusing chart, if price isn’t understood first.

Energy should be focused on what is being seen in the candlesticks themselves. Question such as, “Why did price retreat from the high of the day, week, month?” or “What prompted the bullish run late in the trading session?” are two of potentially thousands of questions a trader might ask when looking to understand price movements. It’s this price analysis that will give legs to the indicators that follow. Furthermore, its these types of questions that will develop a traders ability to analyze an indicator.

In other words, if you aren’t able to analyze price, you will very likely not understand what it means to use technical analysis and if you can’t understand how to use technical analysis, then technical indicators will be down right useless.

To sum up, the keyword I hope to pull your attention toward is analysis. It is a learned skill and not something that is inherent in any of us. We all have to learn how to ask the important questions that lead to potential price predictions and then capitalize on those predictions. Learning to use technical indicators alone is all well and good, but not being able to analyze what the indicator is attempting to highlight, against what price is showing on the chart is just wasted time, in my opinion.

The goal is to dig deeper, understand better, and then act on your ability to see past the surface. Do this and you’ll profit where others see no opportunity at all.

Have a question? Ask me below.

God bless,