Philosophy Of Technical Analysis
Guys, this terribly is my pride and joy. the actual fact that every day of my life i buy to indicate on a computer and start flipping through charts from all around the world, truly could also be a blessing. And I’m not merely talking regarding the S&P500 and Apple. I check informed Asian stock markets, European currencies, Commodities that modify from Gold and crude oil to low and Sugar. I’m constantly gazing the bond market and interest rates, every for dealings functions and information additionally. I check informed loads of charts on longer frames than you will ever imagine. And there’s a awfully smart reason for that. I’m a technician….
So recently I required to talk a small amount bit regarding the principle behind all the chart wanting. There are three basic premises on it the technical approach is based:
The Market action discounts everything
1) prices move in trends
2) History repeats itself
For the requirements of this post, let’s think about what the market action discounting everything extremely means. To quote the great John white potato, “The technician believes that one thing which is able to in all probability have a sway on price – primarily, politically, psychologically, or otherwise – is really reflected among the value of that market. It follows, therefore, that the study of price action is all that is required. whereas this claim may seem assumptive, it’s hard to ail if one takes the time to ponder its true meaning”.
Price action could also be a mirrored image of the shifts in give and demand. If there is a ton of demand than give, costs rise. If give exceeds demand, costs fall. Isn’t this straightforward thought the thought for all the economic and elementary forecasting? we have a tendency to tend toll then let’s flip that around: we have a tendency to as technicians have terminated that if prices ar rising, for despite the rationale, demand ought to exceed give and so the fundamentals ought to be optimistic. We’re talking regarding fundamentals throughout a discussion regarding technical analysis. Funny right? but suppose it. Aren’t technicians indirectly learning fundamentals? Well in step with white potato, most technicians would possibly agree that fundamentals ar the underlying forces of give and demand. It’s what causes markets to maneuver up or down. price just reflects the optimistic or bearish branch of knowledge of the market place.
“As a rule, chartists do not concern themselves with the reasons why prices rise or fall. Very often, among the first stages of a price trend or at essential turning points, no one appearance to know exactly why a market is performing arts a selected way” (See: Is Apple Stock on the purpose of Crash?). “While the technical approach would possibly usually seem to a fault simple in its claims, the logic behind this primary premise – that markets discount everything – becomes loads of compelling the loads of market experience one gains. It follows then that if everything that affects market price is ultimately reflected in market price, then the study of that market price is all that is necessary. By learning price charts and variety of supporting technical indicators, the chartist in result lets the market tell him or her that methodology it’s presumptively to travel. The chartist does not primarily commit to outsmart or predict the market. All of the technical tools ar just techniques used to aid the chart list among the tactic of learning market action. The chart list is tuned in to there are reasons why markets go up or down. He or she merely doesn’t believe that knowing what those reasons are is important among the prognostication process”.