At first I thought I'd found a crystal ball that would lead me to riches. But what these legends taught me - and what my hours and hours of study showed me - is that charts are not foolproof. But they are very good at revealing patterns and helping traders find the points of maximum reward and minimum risk. For example, here's a chart of Alibaba Group Holding (NYSE: BABA). You can see that, starting in late March of last year, the stock started to move higher. Let's say that in June 2020, you were looking for a good entry point. If you drew a straight line, called a trend line, connecting the lows of the stock, you'd see that it'd be best to buy the stock when it came down to that trend line because, in the past, it had bounced off that area of support. (Support is a price level where investors and traders come in and buy the stock, "supporting" it.) In late June, you could have bought the stock at $240 and eventually would have made money. But if you waited until the stock came back down to its trend line, you would have done even better... You'd have bought it at around $210 and ridden it higher for months, as the stock didn't break the trend line until November 2020. More importantly, you'd have lowered your risk. Here's why... When a stock breaks a trend line or other support, that is a sign that the psychology around the stock has changed. For whatever reason, when the stock previously came down to the trend line, buyers jumped in. When it breaks the trend line, buyers no longer come to the rescue. We don't necessarily know if it's because the company's earnings are down, the CEO was arrested or a new competitor emerged - and, to be honest, we don't care. We just know that the psychology of investors has changed and we need to think about getting out. Let's say that last October you were interested in Alibaba. You could have bought it at $310 and then watched it fall all the way to $250, taking a sizable loss. If you waited for the stock to come back down to the trend line, you'd have bought it at $270. Then the stock did in fact break the trend line, signaling that the uptrend that had been in effect since March was over. That was a sell signal, and you'd have gotten out with a small loss instead of a large one. This is just a very simple example. There are many, many ways to use technical analysis. Using charts and technical analysis increases the probability and size of your profits while decreasing the probability and size of a loss. If you're interested in learning more about technical analysis, be sure you don't miss my upcoming three-day training, How to Trade Like a Champion, August 9 through August 11. This free virtual event will show you everything you need to know to get started with technical analysis. Click here to save your spot. Twenty-two years ago, I was told, "Go learn some technical analysis." I'm still studying it every day. I can't imagine making a trade without it. Good investing, Marc | 
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