I recently came across an article about candlestick charting techniques that I found quite interesting. The core logic is very clear: rather than saying technical analysis is a predictive tool, it's better to see it as a risk management tool.

Just thinking about it makes it understandable—candlestick patterns, various indicators, wave theory—all of these are essentially "manual quantification" methods from before computers became widespread. Nowadays, Wall Street's quantitative funds use supercomputers to backtest millions of trading strategies daily. If a publicly taught technique truly consistently made money, it would have been exploited by algorithms long ago. So most of the teaching methods you see online are actually already ineffective.

But does that mean technical analysis is completely useless? Actually, no. Its real value lies in three things: positioning (where we are now), tracking (trend direction), and risk control (when to exit). The key is that it must be subordinate to fundamentals—that's the prerequisite.

The underlying ideas are actually twofold: First, prices fluctuate around value; the long-term moving average (annual or 250-day) essentially represents the value center. Second, prices swing like a pendulum, overshooting due to greed or fear; the greater the deviation, the stronger the reversion force. Combining these two principles, technical analysis isn't used to predict rises or falls but to measure how far prices deviate from value and how extreme market sentiment is.

In practical trading, technical analysis only needs to answer three questions: How far is the price from the moving average? Is the current trend upward, downward, or oscillating? Has the market reached an extreme sentiment (overbought or oversold)? All complex indicators are unnecessary—just look at the trend and the moving average. Follow one principle—"go with the big trend, go against small fluctuations": the major trend is determined by the monthly and yearly charts, while smaller movements are observed on daily and weekly charts.

The trading logic is: only invest in assets with a long-term upward trend, and when short-term pullbacks approach long-term support levels or moving averages, build positions gradually. Also, avoid periods when daily sentiment is at a peak or during sideways consolidation. A complete investment process combines technical analysis with fundamentals—technical analysis acts like a telescope to identify trending assets, while fundamentals are like a microscope to understand why a moving average is rising.