How technical analysis can reveal underlying market structure
Sometimes I am blown away by the fact that I can still have new thoughts about trading after so many years. You would think that at some point… you just know what you know… after living and breathing trading and macro for 25 years… There must be nothing left to learn and no epiphanies remaining to be a-ha’d at some point right? Wrong! I still learn new stuff and my thinking on trading evolves all the time. It’s amazing.
Anyway, while writing an educational Substack on technical analysis last week, I came to an interesting realization: All the technical setups and formations that I use and believe in reflect, in some way, the underlying structure of the market. They reveal something about the behind-the-scenes activity happening on trading floors. That’s probably why those setups and formations appeal to me, but I never realized it until last week.
Conversely, this also explains the common feature of styles and approaches to technical analysis that do not appeal to me. Those approaches do not match a real thing that happens in the market IRL. A highly-complex and mathematical approach that operates at 15,000 feet and does not directly mirror underlying trading activity will never appeal to me.
Perhaps subconsciously I have concluded that this feature of some approaches and not others is the…
