Discovering Technical Analysis
Nearly three decades ago, I became fascinated with the financial markets and technical analysis.
Like many traders, I initially believed that if I could simply learn enough techniques, eventually the market would reveal itself.
So I studied.
And studied.
And studied some more.
Elliott Wave became particularly important to me.
I remember attending intensive Elliott Wave courses and leaving on Sunday convinced that I finally understood it.
Then Monday arrived.
I opened the charts.
And suddenly there seemed to be five different ways to count everything.
That experience repeated itself far too many times.
I knew the rules.
There is an enormous difference between recognizing an Elliott Wave pattern in a textbook and deciding what the market is most probably doing when real money is involved.
It took me years - and many expensive lessons - to understand that.
Eventually, I invested approximately $40,000 to work personally with a mentor.
Someone who could look at my work and tell me:
No.
Why?
Try again.
That changed everything.
It also permanently changed the way I think about education.
The Market Does Not Care How Much You Know
Markets are wonderful teachers because they are completely indifferent to our opinions.
They do not care about our qualifications.
They do not care how many books we have read.
And they certainly do not care how convinced we are that our analysis is correct.
Over the years, I gradually learned that professional analysis is not about certainty.
It is about probabilities.
It is about constructing a hypothesis, determining what evidence supports it, and - perhaps most importantly - knowing exactly what would prove it wrong.
We don't ask the market to prove us right. We construct an analysis that allows the market to prove us wrong.
That distinction changes everything.
It changes the way we forecast.
It changes the way we trade.
And eventually, it changes the way we think.
Being Right Is Not Enough
One of the most expensive lessons traders learn is that a correct forecast does not automatically produce a good trade.
Analysis and trading are related, but they are not the same discipline.
Analysis asks: What is the market most likely to do?
Trading asks: Does this particular opportunity deserve my capital?
That requires much more.
And sometimes, after doing all of that work, the correct decision is still:
The ability to have an opinion does not create the necessity to have one.
And certainly not the necessity to trade it.
The Development of Judgment
Technical analysis is often criticized for being subjective.
It is.
So is medicine.
So is law.
So is music.
So is almost every field in which skilled professionals must interpret incomplete information.
That is what I have tried to teach throughout my career.
Not simply how to identify a pattern.
Not simply how to count waves.
Not simply how to use an indicator.
But how to think.
How to build a hypothesis.
How to recognize uncertainty.
How to know when there is insufficient evidence.
How to say: 'I don't know.'
And perhaps most importantly, how to know when doing nothing is the most professional decision available.
Teaching Traders to Think Independently
Over the years, I have taught and mentored thousands of traders, analysts and market professionals.
I have never been particularly interested in creating dependent students.
A student who permanently needs me to tell him what the market is doing has not really been educated.
The objective is independence.
To develop someone capable of looking at a market, forming a reasoned opinion, understanding what might invalidate that opinion and deciding whether the opportunity actually deserves capital.
That is why correction has always been such an important part of my teaching.
Students frequently know more than they realize.
But they also frequently create rules that don't exist, force patterns because they want an answer, or convince themselves that a chart contains information that simply is not there.
Sometimes the most valuable thing I can tell a student is:
No.
Sometimes it is:
Try again.
And sometimes it is simply:
Leave the damned thing alone.
The Technical Analysis Institute
Eventually, this philosophy became the foundation of the Technical Analysis Institute.
TAI was created not merely to teach technical-analysis techniques, but to help develop complete market professionals.
That means analysis.
My work today continues through the Institute, its educational programs, its market-intelligence work and the traders I continue to teach.
The tools change.
Markets change.
Technology changes.
Human nature changes remarkably little.
And the central challenge remains the same:
That question has fascinated me for almost three decades.
It still does.
Credentials
Prof. Aldo Lagrutta holds the CFTe, CEWA and MSTA designations and is a recipient of the Bronwen Wood Prize from the Society of Technical Analysts in London.
Place credentials at the end of the story. Do not lead with alphabet soup; the biography should establish the person before the qualifications.
My work in market analysis, forecasting and professional trader development continues through the Technical Analysis Institute.
© Copyright Aldo Lagrutta. All Rights Reserved.