It's been over a year since we released our game changing report on technical analysis indicators called SIGNALS, and since then I haven't talked more about how we are using technical analysis in conjunction with our options trading. So, I wanted to revisit this topic on the podcast today because I still see a lot of simple, easy to correct, mistakes being made by both new and experienced traders when it comes to ready signals generated from technical analysis.
Key Points from this Episode:
- Technical analysis is a very small part of how we do options trading right now.
- You do not need to use technicals to be successful as an options trader; however, it can enhance your ability to make decisions.
- Technical analysis is often best used when you know you have to skew your position in one way or another.
- Often times technical analysis is used incorrectly when traders believe the signals they get means that the stock is going to turn around and go the opposite direction.
- The signal does not tell you when the stock will turn on a dime, which they rarely do.
- When you get a technical signal it indicates that the pace at which the stock is moving is perhaps too fast in the particular direction.
- The marriage of technical analysis and options trading strategies, with a margin of error, gives you the best trading advantage.
Notable Metrics from the Testing Report
- 95% of technicals completely failed the benchmark index, and never performed a net return higher than the S&P.
- The overall average win rate of technical analysis was 45%.
- 208 technical analysis tests blew up model portfolios, creating losses of over 100% after commissions.
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