One of the issues I have with technical analysis and its more die hard adherents is that they assume they are making a prediction when in fact they are making a bet. This might seem to be a mild quibble of a simple matter of definitions but the two words carry much different meanings both in terms of what you do with the information you have generated and your emotional investment in the trade.
Consider the chart below –
This is a trade I took last week in Oats – you can see a classic breakout of resistance to a new high. On seeing this signal I went long and the price promptly reversed and knocked me out of the trade for a small loss. I regard this as simply one of those things and I have this attitude because I regarded it as a bet, not a prediction. The viewing of trades as a bet means that you are always playing defense – your risk is small and you are emotionally prepared for the trade not to go your way. If I had viewed this as a prediction I would be emotionally wedded to the trade which most likely means little risk control and no stop loss. Pretty much the way most hedge funds trade.