Why Technical Analysis Works Sometimes and Fails Often

By Gurjeet Singh, developer of CoinPriceAlert · Published 22 August 2026 · 3 min read

The part that is real

Technical analysis describes where orders are. Previous highs and lows are where people transacted before and therefore where unfilled intentions, stop orders and psychological anchors cluster. Widely watched levels attract activity because they are widely watched, which is a genuine self-fulfilling mechanism.

It is also a reasonable way to summarise a large amount of price history quickly, and to define levels for risk management. "Where would I be wrong" is a question a chart answers well.

The part that is not

No indicator contains information the price does not already hold — every one of them is derived from price and volume. They describe the past compactly; they do not see forward. Any claim that a pattern predicts an outcome with a given probability is asserting far more than the evidence supports.

Patterns are also easy to find in random data, and human pattern recognition does not distinguish between meaningful structure and noise. Much of what looks like a working system is selection: the examples that worked are memorable and the ones that did not are forgotten.

How to use it without deceiving yourself

Use it for risk definition and for identifying levels where something might happen, not for prediction. Combine it with context — the broader market, positioning, whether a real event is driving the move — rather than reading a chart in isolation.

And keep a record of what you concluded and what happened. Almost nobody does this, which is why almost everyone believes their approach works better than it does. A written record is the only defence against remembering selectively.

Timeframes: why the same signal means different things

Timeframe selection is quietly the most consequential setting on any chart. A 5-minute chart is dominated by noise, execution and short-term liquidity. A daily chart shows genuine supply and demand. A weekly chart shows the trend that actually determines multi-year outcomes. None is more correct — but mixing them is how people end up taking a long-term position and managing it on a 15-minute chart.

Match the timeframe to your holding period. If you expect to hold for years, intraday movement is not information you should be acting on, and watching it will only cost you the position. If you are trading a multi-day move, the weekly trend is context rather than a trigger.

A useful convention: use the higher timeframe to decide direction and whether to be involved at all, and the lower one only to choose an entry once that decision is made. Alerts fit this naturally — set them on levels that matter on the higher timeframe, and you stop needing to watch the lower one.

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