In the world of stock trading, we often place our focus on a company’s fundamentals, such as earnings, cash flow, growth potential rather than Technical Analysis.

This approach works well when dealing with privately held companies, where financial metrics play a direct role in shaping stock prices. It’s a straightforward equation: when a company performs well, its stock is priced higher; conversely, when a company performs poorly, its stock is priced lower.

The Complexity of Publicly Traded Companies

However, there is a significant difference when we enter the realm of publicly traded companies.

The equation becomes significantly more complex. In this environment, the law of supply and demand takes center stage, introducing a multitude of variables into the mix. The previous equation becomes much more intricate. So, does looking at just fundamental data provide a good solution to the new equation? Is this the best approach? Should it be?

The answer lies in a profound realization — in the world of the stock market, every emotion, every burst of greed and fear, every analyst’s recommendation, every major event, and every piece of news ultimately converge and express themselves in one solitary way: through price.

There is no other way of expression. Price is the unfiltered raw data of everything, a reflection of the market’s inner workings and the stock market’s true mechanics. Price is the ultimate vessel for conveying the collective wisdom of the market, encapsulating a diverse array of both known and concealed variables.

The Role of Patterns and Technical Analysis

Now, what does that mean? Let’s forget about the stock market for a moment and think about our world, our universe. Even though it may appear random, it operates under a set of laws, from the smallest atomic structures to the grandest cosmic phenomena. The only way to discern this order within randomness and chaos is through the identification of small recurring patterns of raw data.

We must acknowledge that patterns form the foundation of our understanding of the world. Whether we’re discussing the structure of galaxies, the intricate choreography of weather patterns, or the complex tapestry of human behavior, patterns provide the underlying structure for comprehension.

Patterns are our only means of transforming raw data into something more profound. They serve as a testament to the underlying laws and mechanics that guide the seemingly unpredictable, where randomness itself reveals its essence. Price fluctuations, as the canvas on which these market variables paint their story, harbor the potential to unveil the common threads that unite these diverse elements. So, does technical analysis hold the key to unlocking the mysteries of the stock market?

The answer, it appears, depends on what you seek to discover. Do you aim to predict the outcome, or do you aim to discover the connections and the mechanisms of the hidden system and possibly uncover other variables? Most traders seek the prediction element through technical analysis; this is what they call the “Holy Grail.” But is this our true edge, or is there something better we must seek?

Prediction is not our true edge. Our true edge lies in odds, dynamics, and, most importantly, timing.

The True Edge in Trading

The question should not be, “What’s the chance this pattern will work?” The true question is: Is this pattern that occurs over and over highly dynamic? Can this pattern that I have seen repeatedly give me way more than I risk if it unfolds all of its true power? Can this pattern tell me quickly if my decision is right or wrong? Time is our most important asset. The allocation of capital is what separates an amazing performance from a mediocre one. The power to recognize if your decision is wrong or right fast gives you a true edge.

Take my word for that. You can be right 25% in your predictions and still make large amounts of money. I have the proof, and I am not talking about my performance, but because I did the work and studied stock market history, ticker by ticker. I verified that the same patterns occurred 100 years ago, 50 years ago, 10 years ago; they occur now and will continue to occur over and over again because they obey the laws of supply and demand and contain the one and only expression of data: price. Many great traders have done and verified the same. This should not be abnormal but the norm.

But did I seek to find the win rate through occurring patterns, or did I focus on dynamics and timing? That is the key. Patterns shouldn’t be used as a form of sole prediction but as forms of favorable odds based on dynamics and timing for the optimal risk-to-reward and money allocation.

This is the true magnum opus of the trader. When he finally understands what he was seeking for so long was not the Holy Grail, he finally understands that different meanings arise from the same things he has been looking at for so long. This is the moment when he actually “gets it.” The moment when the stock market reveals to him its true mechanics.

When you synchronize with these mechanics, you know what to seek. When you know what you seek, you know what to study. When you know what to study, you gain conviction.

Forget about prediction and start thinking in terms of dynamics, inner mechanisms, odds, and timing. This is the true power technical analysis gives. This is your way of solving the complex equation of the market’s behavior accompanied by fundamental data. This is the “Holy Grail.”