I have tried various indicators such as SMA's, EMA's, stochastics, Bollinger bands etc, while trying to analyze a stock, but they often are only as effective as making a wild guess on picking a stock. My question here is, how can you use the indicators to effective use and which one of these is the most reliable(if any)?
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1 Answer
Sure they work - right until they don't.
Explanation: A stock picking strategy based on technical indicators is at worst a mix of random guessing and confirmation bias, which will "work" only due to luck.
At best, it exploits a systematic inefficiency of the market. And any such inefficiency will automatically disappear when it is exploited by many traders. If it's published in a book, it is pretty much guaranteed not to work anymore.
Oh, and you only get to know in hindsight (if at all) which of the two cases above applies to any given strategy.
answered May 28, 2014 at 14:25
