Stop Falling for Self-Proclaimed Chart Gurus: Why They Don’t Actually Help You

*This post is about trading. Any mention of “efficiency” refers specifically to efficiency within technical analysis.*

Every time a strong bull market drags on, newly discovered “hidden masters” of the market start to appear—people no one had heard of before who suddenly get branded as gurus.

They come in many forms: spammy text ads, various online platforms, and even so‑called “teachers” someone personally recommends to you.

I believe these “gurus” existed long before financial markets drew this much attention. They were just operating in different arenas and in different guises.

You see where this is going, right? I’m talking about cults. These days, if someone on the street approaches you saying you have a “good aura,” most people instantly recognize it as a cult pitch and think, “Who falls for this anymore?” But in the past, for all sorts of reasons, there were many people whose beliefs were easily shaken.

I don’t think things are all that different today. An app literally called “rocket stock screener” has over 100,000 downloads and more than 900 reviews. Financial scams targeting seniors keep popping up. Some people still borrow money to invest based on anonymous “expert tips” and rumor sheets. In 1937, there was Baekbaekgyo. Eighty years later, no one believes that anymore. Likewise, 80 years from now, no one will believe in these financial-market cults either. By 2100, people will say, “Who on earth still falls for those rocket‑stock scanners?”

The type of guru I want to focus on here is the technical analysis guru. What exactly do they claim, and where do those claims go wrong?

Price Action

Across YouTube, KakaoTalk chat rooms, Naver communities, and elsewhere, these self‑proclaimed masters all tend to push one common idea.

That idea is Price Action. Traditional technical analysis based on Price Action assumes markets are inefficient and that prices are predictable, and it often uses investor psychology as a storytelling device to explain what’s happening.

Price Action theory says that because prices reflect crowd psychology, they tend to form recurring patterns—and it codifies those patterns into a framework.

Classic examples include triangles, wedges, flags, head‑and‑shoulders patterns, Fibonacci levels, and Elliott waves.

Example of a triangle consolidation: the trading range narrows sharply, and volatility eventually expands in one direction.

Example of a flag: price moves within two parallel lines, then breaks out in the direction of the prior trend.

Example of a wedge: essentially a type of triangle pattern.

Example of a head‑and‑shoulders pattern: named because the shape resembles a head flanked by two shoulders.

There is one fatal flaw in this kind of Price Action approach: the story keeps changing depending on how prices move afterward. The more patterns you layer on to explain the chart, the more likely you are to fall into the trap of rationalization. Let’s walk through an example.

Here’s a randomly selected stock.

The stock had been trending down along the black line. You might have expected it to keep falling in the direction of the arrow, but instead it broke above the upper black line.

Since the stock has broken out of the prior downtrend, you draw a new rising support line. You think, “Now it should go up,” and buy in with that hope.

Because this looks like a wedge pattern in Price Action terms.

But what if the price doesn’t actually go up from here?

If the price keeps falling as in the chart, you draw yet another support line. Now you tell yourself it’s forming a triangle consolidation in Price Action terms, so it should go up soon—and you rationalize holding on.

And if it still doesn’t go up from there?

You start thinking your previous support lines were wrong and redraw them again. “This time it’ll really go up,” you tell yourself.

If even that fails and the price keeps dropping, an investor who traded this way will likely throw in the towel, saying “the market has gone crazy,” and sell out.

By the time you reach a point where you can no longer rationalize anything, your loss is already −12.37%. Is that really an “efficient” method?

His predictions can be wrong at any time.

Of course, he might actually be good. People say he’s been doing this for a long time. But does his prediction actually help me?

Not at all. The reason is the difference in profit‑and‑loss ratios.

The charts above show backtest results for the same strategy, changing only the position size. The first uses just 1% of total capital per trade; the second uses 100%.

The equity curves point in completely different directions. That’s because compounding works on losses too.

If you make a 50% gain on 1 million won, then reinvest and take a 50% loss:

100 × 1.5 = 150

150 × 0.5 = 75

Conversely, if you first take a 50% loss and then reinvest and make a 50% gain:

100 × 0.5 = 50

50 × 1.5 = 75

In both cases, you end up with a loss, don’t you?

His trading capital and position sizing

and my trading capital and position sizing are different, so even with the same win rate, our profit‑and‑loss profiles can be completely different.

If, during a brief hot streak, you thought “this guy is on fire” and ramped up your own position size to follow him, the subsequent drawdown in your account would have been even more severe.

In other words, even if the person you’re following has a high win rate, you can still have serious problems.

Ultimately, only you can protect your own account. You’re free to make predictions, but I believe the most important thing is to prepare for being wrong.

Instead of trying to predict price levels, think about when you’ll buy and sell, and compare the potential profit and loss in each scenario.

*This is a hypothetical example.*

In this chart, the price is moving sideways in a range. It has never broken above the green line or below the black line.

In this situation, if you focus purely on the profit‑and‑loss ratio, you might reasonably conclude that it’s best to enter near the black line.

If the price dips a bit further, you can simply cut your loss. On the upside, you can at least expect a move back toward the red line—the midpoint between the green and black lines.

From the blue vertical line—the point where the green, red, and black lines are drawn—there are four hypothetical entry opportunities in this example.

If you had actually traded this, the second and fourth entries would have hit your stop as the price broke below the black line.

The first and third entries would have taken profit at the red line.

So your win rate would only be 50%, but thanks to the favorable profit‑and‑loss ratio, you wouldn’t end up with a net loss.

This is what I mean by preparing to be wrong. Since it’s extremely difficult to predict stock prices accurately with any analysis method, it makes more sense to focus on the profit‑and‑loss trade‑off.

In fact, even fundamental stock picking—choosing “good companies”—can be seen as a derivative of profit‑and‑loss management. If you could only buy either SillaJen or Samsung Electronics, everyone would choose Samsung Electronics.

That’s because we make investment decisions based on how far the current price deviates from fair intrinsic value (or from the company’s long‑term viability).

Whatever your investment style, why not at least think through your own personal line in the sand? All of our accounts are worth protecting.