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Fidelity’s View of Technical Analysis

The following excerpts were taken from Fidelity’s web site. While trend following is technical, it has nothing to do with the definitions Fidelity uses to describe technical trading. The definitions Fidelity uses are like so many random books on technical analysis — loaded with useless filler. If you follow Fidelity’s view you are in trouble.

Technical analysts examine a stock’s past price movements and use that historical information to forecast future price movements.

TurtleTrader® comment: There is no forecasting to trend following.

The primary component of technical analysis is the stock chart.

TurtleTrader® comment: The primary component for trend following is the price. You do not need to interpret a chart to make a decision when trading as a trend follower. Charts are used on the TurtleTrader site to show example wins. But, when trading what good do they do if price is the only relevant variable?

Technicians sometimes equate studying stock charts to a surgeon looking at x-rays before operating on a patient.

TurtleTrader® comment: This is pure hype.

Technical analysis is very subjective. If you are a novice and want to trade using technical analysis, you should take it slowly and learn what tools are available to get a sense of what works and what doesn’t.

TurtleTrader® comment: Trend following is objective, not subjective. You can define it.

Support is the price level at which a stock’s price has stopped falling and has either moved sideways or reversed direction. At this level, the demand for the stock is thought to be strong enough to prevent the price from dropping further. When a stock’s price is dropping, buyers become more inclined to buy, and sellers become less inclined to sell. In other words, demand will exceed supply and prevent the price from falling further.

TurtleTrader® comment: This is not a reachable goal by any objective measure.

Resistance is the price level at which selling pressure is strong enough to prevent a stock from rising further.

TurtleTrader® comment: This sounds great, but there is no way to achieve the theory in the real world.

Technicians analyze charts to determine what happens to the stock when a key support or resistance level is reached.

TurtleTrader® comment: Trend followers do not do this. It is an impossible statement.

Trying to make sense of all the technical data revealed in charts could be overwhelming, but with time and practice, you can learn to read a chart in seconds.

TurtleTrader® comment: The only issue that matters is price action — not charts.

Over time, you can learn how to combine sophisticated indicators such as Bollinger bands, moving averages, stochastics, and Fibonacci lines to help you determine ideal entry and exit points.

TurtleTrader® comment: These indicators are not trend following. More on indicator hype.

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