{"format":"alysly-page/1","url":"https://alysly.com/learn/what-technical-analysis-can-do/","json":"https://alysly.com/json/learn/what-technical-analysis-can-do/index.json","lang":"en-US","title":"Does Technical Analysis Work? What the Evidence Shows","description":"Self-fulfilling prophecies, base rates and selection bias: a sober assessment of what chart analysis can establish and where it runs out.","published":"2026-08-02T15:41:33+02:00","modified":"2026-11-07T14:18:22+01:00","alternates":[{"lang":"de-DE","url":"https://alysly.com/de/lernen/was-technische-analyse-leistet/","json":"https://alysly.com/json/de/lernen/was-technische-analyse-leistet/index.json"}],"about":"Machine-readable version of the page at url. It contains the text, tables and key figures published there, but not the interactive charts and tools.","breadcrumb":[{"name":"Investing & Trading Basics","url":"https://alysly.com/learn/"},{"name":"Level 1","url":"https://alysly.com/learn/#level-1"},{"name":"What Technical Analysis Can and Cannot Do","url":"https://alysly.com/learn/what-technical-analysis-can-do/"}],"content":[{"type":"paragraph","text":"Level 1 Reading Charts · Part 7/7"},{"type":"heading","level":1,"text":"What Technical Analysis Can and Cannot Do"},{"type":"paragraph","text":"By Alexander Bock, founder and data analyst","links":[{"text":"Alexander Bock","href":"https://alysly.com/about/"}]},{"type":"paragraph","text":"The first level ends with the uncomfortable question: does any of this work? The honest answer has several parts — and it explains why the next two levels are built the way they are."},{"type":"heading","level":2,"id":"three-mechanisms-that-really-do-work","text":"Three Mechanisms That Really Do Work"},{"type":"paragraph","text":"Self-reference. When enough participants watch the same level, orders really do build up there. The effect is real, but it does not scale. The better known a level is, the more attractive it becomes as a target for the other side."},{"type":"paragraph","text":"Order mechanics. Stop orders cluster at visible prices. When they trigger, a short move follows. That move is not a change of opinion but forced execution. It explains false breakouts and fast moves after a break better than any catalog of patterns."},{"type":"paragraph","text":"Behavioral patterns. Loss aversion, anchoring and herd behavior are well documented, and they produce price structures that come back again and again. What they do not give you is timing."},{"type":"paragraph","text":"The best-supported result in all of this is not the pattern catalog but momentum. Instruments that performed relatively strongly over the past six to twelve months tend to keep going for a few more months. The effect has been studied across decades and across markets — and it is simply a trend statement in measurable form."},{"type":"heading","level":2,"id":"four-reasons-why-patterns-look-better-than-they-are","text":"Four Reasons Why Patterns Look Better Than They Are"},{"type":"paragraph","text":"The base rate is missing. “In seven out of ten cases a rally followed” only means something if you know how often a rally follows anyway. If stocks rise in 54 percent of all weeks, a pattern has to beat 54 percent by a clear margin before it carries any information."},{"type":"image","src":"https://alysly.com/img/ta/base-rate.5f5c67381a3699e5ebfdea6b09be9ca4b2fed58cf9544451d324047147e728bb.webp","alt":"Bar comparison of the base rate of up days versus the hit rate after two patterns, with uncertainty ranges"},{"type":"paragraph","text":"(1) The base rate: the market closes higher on well over half of all days anyway. Every hit rate has to be measured against that number, not against zero. (2) Pattern A hits in 55% of cases — three points above the base rate. (3) The gray range is the uncertainty at 80 observed cases: it runs from 44% to 66% and contains the base rate. That shows nothing but noise. Only once this range clears the base rate is there anything to discuss."},{"type":"paragraph","text":"Selection bias in the examples. Textbooks show formations that worked. The ones that failed look identical until shortly before the end — and they never make it into the book. This is why every graphic in this course is synthetic: a real example would always be one that was picked afterwards."},{"type":"paragraph","text":"Hindsight. In a finished chart every pattern is obvious. At the right edge, where you have to decide, they are candidates, and most of them will not work out."},{"type":"paragraph","text":"Degrees of freedom. Timeframe, scale, indicator settings, the definition of a zone: with enough adjustable knobs, some combination always would have worked in the past. How quickly that search produces an apparently excellent result is the subject of Level 3.","links":[{"text":"Level 3","href":"https://alysly.com/learn/#level-3"}]},{"type":"heading","level":2,"id":"what-this-means","text":"What This Means"},{"type":"paragraph","text":"Charting is not worthless. But its contribution lies somewhere other than where it is usually claimed:"},{"type":"list","ordered":false,"items":["It provides a shared language for price structure, and therefore descriptions you can compare.","It provides testable levels. A pattern with a clear invalidation point is what makes risk management possible in the first place.","It provides no forecast. If you want a statement about probability, you have to measure it. That takes a sample that is large enough and a clean separation between training and test periods."]},{"type":"paragraph","text":"That is exactly the path this course takes. Level 2 describes patterns and indicators precisely enough to make them testable at all. Level 3 shows what goes wrong during testing, and how financial research deals with it."},{"type":"paragraph","text":"To test an idea against historical data, start with the backtester. As Level 3 spells out, a single good backtest proves very little.","links":[{"text":"backtester","href":"https://alysly.com/tools/portfolio-analysis/etf-backtest/"}]},{"type":"heading","level":2,"id":"next","text":"Next"},{"type":"paragraph","text":"That is the end of Level 1. Level 2 continues with candlestick patterns."},{"type":"list","ordered":false,"items":[{"text":"Previous Risk, Stops and Position Sizing","href":"https://alysly.com/learn/risk-and-position-sizing/"},{"text":"Next · Level 2 Candlestick Reversal Patterns","href":"https://alysly.com/learn/candlestick-reversal-patterns/"}]},{"type":"heading","level":2,"text":"Indices"},{"type":"table","caption":"Indices, performance over the selected period","columns":["Index","1M"],"rows":[[{"text":"Dow Jones","href":"https://alysly.com/markets/indices/dow-jones/"},{"text":"+1.2%","data":{"m1":"+1.2%","m3":"-2.9%","m6":"+4.3%","ytd":"+8.7%","max":"+31.4%"}}],[{"text":"S&P 500","href":"https://alysly.com/markets/indices/sp500/"},{"text":"-2.7%","data":{"m1":"-2.7%","m3":"-2.7%","m6":"+1.2%","ytd":"+11.0%","max":"+36.1%"}}],[{"text":"MSCI World","href":"https://alysly.com/markets/indices/msci-world/"},{"text":"-1.9%","data":{"m1":"-1.9%","m3":"-3.0%","m6":"+1.2%","ytd":"+10.4%","max":"+35.6%"}}],[{"text":"MSCI ACWI","href":"https://alysly.com/markets/indices/msci-acwi/"},{"text":"-2.6%","data":{"m1":"-2.6%","m3":"-3.7%","m6":"-0.1%","ytd":"+10.6%","max":"+42.1%"}}]]},{"type":"heading","level":2,"text":"ETFs"},{"type":"table","caption":"ETFs, performance over the selected period","columns":["Fund","1M"],"rows":[[{"text":"SPDR S&P 500 ETF Trust SPY","links":[{"text":"SPDR S&P 500 ETF Trust","href":"https://alysly.com/markets/etfs/us/spy/"}]},{"text":"-2.7%","data":{"m1":"-2.7%","m3":"-2.7%","m6":"+1.2%","ytd":"+11.0%","max":"+36.1%"}}],[{"text":"Vanguard S&P 500 ETF VOO","links":[{"text":"Vanguard S&P 500 ETF","href":"https://alysly.com/markets/etfs/us/voo/"}]},{"text":"-2.7%","data":{"m1":"-2.7%","m3":"-2.7%","m6":"+1.2%","ytd":"+11.0%","max":"+34.5%"}}],[{"text":"iShares Core MSCI World UCITS ETF USD (Acc) EUNL","links":[{"text":"iShares Core MSCI World UCITS ETF USD (Acc)","href":"https://alysly.com/markets/etfs/ishares-core-msci-world-ucits-etf-usd-acc/"}]},{"text":"-1.8%","data":{"m1":"-1.8%","m3":"-3.0%","m6":"+1.9%","ytd":"+11.1%","max":"+490.2%"}}],[{"text":"Xtrackers MSCI Emerging Markets UCITS ETF 1c XMME","links":[{"text":"Xtrackers MSCI Emerging Markets UCITS ETF 1c","href":"https://alysly.com/markets/etfs/xtrackers-msci-emerging-markets-ucits-etf-1c/"}]},{"text":"-6.3%","data":{"m1":"-6.3%","m3":"-7.8%","m6":"-8.3%","ytd":"+12.6%","max":"+90.7%"}}]]},{"type":"heading","level":2,"text":"Stocks"},{"type":"table","caption":"Stocks, performance over the selected period","columns":["Stock","1M"],"rows":[[{"text":"NVIDIA Corporation NVDA","links":[{"text":"NVIDIA Corporation","href":"https://alysly.com/markets/stocks/nvidia-corporation/"},{"text":"United States","href":"https://alysly.com/markets/stocks/browse/?country=United%20States"}]},{"text":"-27.3%","data":{"m1":"-27.3%","m3":"-26.2%","m6":"-29.5%","ytd":"-10.9%","max":"+30.4%"}}],[{"text":"Apple Inc. AAPL","links":[{"text":"Apple Inc.","href":"https://alysly.com/markets/stocks/apple-inc/"},{"text":"United States","href":"https://alysly.com/markets/stocks/browse/?country=United%20States"}]},{"text":"+4.0%","data":{"m1":"+4.0%","m3":"+16.3%","m6":"+19.0%","ytd":"+30.5%","max":"+55.9%"}}],[{"text":"Tesla Inc. TSLA","links":[{"text":"Tesla Inc.","href":"https://alysly.com/markets/stocks/tesla-inc/"},{"text":"United States","href":"https://alysly.com/markets/stocks/browse/?country=United%20States"}]},{"text":"+5.9%","data":{"m1":"+5.9%","m3":"+16.9%","m6":"-10.3%","ytd":"-11.6%","max":"+64.9%"}}]]},{"type":"paragraph","text":"Data note 1","href":"#dn-1"},{"type":"heading","level":2,"text":"More Research"},{"type":"list","ordered":false,"items":[{"text":"May 19, 2026 Crypto 45.6% Bitcoin’s annualized volatility, Jul 2024 — Sep 2026 Bitcoin in Investment Portfolios: The Real Numbers Bitcoin is calmer than it was and still about three times as volatile as the stock market. It moves with stocks, not with gold.","href":"https://alysly.com/research/bitcoin-investment-portfolios/"},{"text":"Oct 14, 2025 Trading +227.8% the market itself, 2017–2026, no trading Why Most Traders Lose Money: What the Data Shows The market paid 13.5% a year. Five measurable forces decide how much of that a trader keeps, and at ordinary trading frequencies it is very little.","href":"https://alysly.com/research/why-most-traders-lose-money/"},{"text":"Jan 13, 2026 ETFs 73.0% United States share of the MSCI World US Weight in the MSCI World: What Does It Really Mean for Investors? Holding 1,248 companies sounds diversified. Measured by weight, the MSCI World behaves like 85 of them.","href":"https://alysly.com/research/msci-world-us-weight/"}]},{"type":"paragraph","text":"View all research","href":"https://alysly.com/research/"},{"type":"heading","level":2,"text":"Learn"},{"type":"list","ordered":false,"items":[{"text":"Candlestick Reversal Patterns Hammer, engulfing, star formations — structure, meaning, conditions.","href":"https://alysly.com/learn/candlestick-reversal-patterns/"},{"text":"Continuation Patterns and the Doji Family Doji, marubozu, soldiers and crows — indecision or continuation.","href":"https://alysly.com/learn/candlestick-continuation-patterns/"}]},{"type":"paragraph","text":"Course overview","href":"https://alysly.com/learn/"},{"type":"paragraph","text":"Published Aug 2, 2026 · Updated Nov 7, 2026 · Data checked automatically Nov 13, 2026"},{"type":"heading","level":2,"id":"note-legend-h","text":"Data Notes"},{"type":"paragraph","text":"All calculations run automatically and are not investment advice."},{"type":"list","ordered":true,"items":[{"id":"dn-1","text":"Returns computed automatically from the price series, excluding dividends, taxes and costs."}]},{"type":"paragraph","text":"Data and methodology: Alysly · Responsible for content: Alexander Bock","links":[{"text":"Alysly","href":"https://alysly.com/methodology/"},{"text":"Alexander Bock","href":"https://alysly.com/about/"}]},{"type":"paragraph","text":"View all data notes","href":"https://alysly.com/notes/"}],"structured_data":[{"@context":"https://schema.org","@graph":[{"@type":"Organization","@id":"https://alysly.com/#org","name":"Alysly","url":"https://alysly.com/","logo":{"@type":"ImageObject","url":"https://alysly.com/img/icon-512.png","width":512,"height":512},"description":"Free analysis tools for traders and long-term investors. 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