If we want to define technical (or technical) analysis in one sentence and in a nutshell, technical analysis is the study of market behaviors using charts and with the aim of predicting the future of price trends.
Price behavior has always played a major role in technical analysis, and transaction volume behavior complements this principle. Price behavior and market behavior have similar meanings in many cases and are used interchangeably.
The three basic topics as the basis of the logical topics of technical analysis are as follows:
1- Everything is included in the price.
2. Prices are based on trends.
3- History repeats itself.
1 – Everything is included in the price
It may be argued that the phrase “everything is included in the price" is the basis of technical analysis. Unless we understand this, it may be futile to learn technical analysis.
A technical analyst initially believes that anything that can affect a price, including political, fundamental, geographical, or other factors, is included in the price of a share. After understanding and accepting the above sentence as an introduction to technical analysis, we conclude that price analysis is all we need.
It has taken a long time to prove the inaccuracy of this claim (which some analysts are also proud of) and no results have been obtained. All technical analysts believe that price changes are a function of supply and demand.
If the demand exceeds the supply, then the price will rise and if the supply exceeds the demand, the price will decrease. These changes are the basis of all economic and fundamental predictions. The technicians’ perception of this principle is that if the price goes up for any reason, then demand must have outpaced supply and the causes of fundamentalism have had their effect, and if the price has fallen, the fundamental and fundamental reasons have become ineffective.
So in this article, we conclude that a technical analyst is also studying some kind of fundamental and fundamental issues.
Most technical analysts believe that the force that changes supply and demand is the result of fundamental changes in the market economy, and that the same force affects prices. Charts alone never cause prices to rise or fall.
It is a law that the technical analyst does not seek to change the direction of prices in any way. Most of the time at the beginning of a trend or at the point of changing the direction of the price from increase to decrease or vice versa no one knows for sure the reason for this change of direction. (In fact, for a technical analyst, it doesn’t matter what it is and only focuses on price and volume.) The technical analyst can easily identify this change in a timely manner and measure its stability using patterns.
It should be borne in mind that as long as a technical analyst maintains that everything is included in the price, he will be able to make more profit from many experienced market people (who do not use these tools).
Accepting the phrase “everything is included in the price" as the first step is equivalent to accepting the importance of price review.
An analyst does not necessarily need to be smarter than the market or be able to make surprising predictions about price changes. By examining the price trend with the help of various technical tools such as indicators, a technical analyst can identify and select the best time to buy and sell shares.
2 – Prices move based on trends
It is important to recognize that prices are based on trends. Here, too, until we believe in this principle, the effort to learn technical analysis is futile.
The purpose of the price chart is to identify the trend and predict the direction of the trend, before future prices determine the future trend.
There is also a well-established theory that prices move based on trends, or in other words, that prices like to maintain their current trend, rather than change direction. This law is another expression of Newton’s first law of motion. It may also be argued that prices continue to be in the current trend until the factors that stop them from moving stop.
This law is one of the strongest claims of technical analysts. They believe that trends will continue to exist until external factors affect them.
3 – History repeats itself
Much of the discussion of technical analysis and market behavior research is similar to that of psychology in humans.
For example, the patterns of charts drawn a few years ago accurately reflect the psychological impact of the issues of that period on price trends.
The charts clearly reveal the psychology of the market. Since the patterns have worked well in the past, it has been assumed that they will respond just as well in the future. Their foundation is the principles of psychology, which allows us to accept them as a fixed principle and be able to trust them.
Another expression of this is to say: history repeats itself, and this is the key to predicting the future through past analysis, or to say that the future is nothing but a repetition of the past.
Published and authored by FalconProfit.com
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