Why You Don't Need To Know Technical Analysis

In any given year, it can be useful to understand at least the basics of technical analysis—long-term averages and trading signals. This is especially true if you are day trading. But this year is different.

Trade tariffs have introduced so much volatility that traditional analysis can’t keep pace with market reality. The constant flow of news from the US—tariffs, political changes, and pressure on the Federal Reserve—has created a ferocious push-and-pull in the market, making charts feel almost obsolete.

So how do you protect your open positions? And how do you decide whether to stay invested and weather the storm, or pull out?

Now more than ever, it’s important to keep the bigger picture in mind. For example, when looking at a single stock, ask: Is the company making a profit, and how is that profit growing compared to previous years? Revenue growth isn’t enough—the bottom line, net profit, should at least be keeping pace with the broader market.

Next, consider whether the company is likely to be affected by US trade tariffs. This can be difficult to assess since the rules seem to change weekly. A good starting point, however, is to review the company’s earnings statements to see how much exposure they have to the US, and how much of their production or trade takes place elsewhere.

Finally, think about your investment horizon. If you’re not trading daily, charts may not be hugely relevant. On a weekly or monthly basis, however, tools like the 30-day moving average can still help you set stop-loss or limit orders. Where you set your stop-loss level will ultimately depend on your personal comfort with risk.

 In today’s market, you may need to spend more time watching the news than studying charts to know when to get in or out of a position. Just make sure you pick your sources of information wisely—the quality of what you follow will shape the quality of your decisions.