The philosophy of technical analysis
At the outset I would like to say that the belief in the technical analysis and can make can not be achieved before it is absorbed and understanding of its aspects, in particular the understanding of the philosophy underpinning these capabilities.
Can be defined as a study of technical analysis of market behavior through the use of charts to predict future price movements, market behavior and the term includes the three main sources of information available for the price, a technical analyst with Price
Volume traded quantities
And contracts available Open interest
(The use of contracts available in the futures markets Futures, options contracts and Options).
The philosophy of technical analysis
(And some logical as well)
There are three rules depend on which method of technical analysis:
The behavior of the market absorbs everything
Market Actions Discount Everything.
Prices Moves in Trends.
History Repeats Itself.
The behavior of the market absorbs everything
Market actions discounts everything
This phrase is considered the cornerstone of technical analysis, and if it is not absorbed well and fully accept all of what would later be taken to give any meaning. Technical analyst believes that anything that can affect the price
(Whether economically or politically, or psychologically, or any other element)
Is, in fact, fully reflected the market price. For this we can say that the study of the behavior of price movement is all that is required. With these words it seems naive, but later, after spending time in the study of real meaning, it is difficult to oppose it.
The claims of all the technical analyst is that the behavior of the price is a reflection of the change between supply and demand. If the increased demand on the supply, the price will rise, and increased supply over demand, the price will decline. This behavior is the basis for all the economic outlook and fundamental. Of this technical analyst to translate these words to reach the conclusion that if the price rises for any particular reason, the demand has increased for the presentation and the essential elements (economic) should be good. If the opposite happened and the deterioration of prices, it was imperative that the essential elements (economic) must be bad. If the previous comment about the main elements of surprise by talking about technical analysis behooves him not to be the case, the technical analyst is in an indirect study of the basic elements. Most analysts agree that the professionals are the key elements that cause the low and high market Bull & Bear, indicative fees alone do not impact on the market, up or down either, they simply reflect the market situation both in the case of a rise or decline in market Bull Bear.
A rule, the technical analyst is not the same reason behind the higher prices or getting out, often at the beginning of a trend or the price at a critical turning point, a person can not justify the behavior of the market carefully in this particular stage. While the method of technical analysis and a simplified logically justified to ignore the behavior of the market of all, the market time savers tended to ignore all aspects, including the basic elements. We can also say that since all affect the market price will be reflected on the market price, then study the behavior of the price is all that is needed. By the way the study of price charts, with the support of this study, the technical indicators, market analyst makes Ihadth and tell him whether it is going up or down. The technical analyst, as we know, not trying, or pretending to be clever on the market expectations, but the invention of tools and techniques used for technical assistance in the process of studying the behavior of the market, it is known that there are reasons behind the rise or fall, but the market does not believe that knowledge of these reasons is necessary in the process of emerging expectations.
Prices move in trends
The concept of trends from one of the basic pillars of technical analysis, and once again the lack of understanding and acceptance of this part of the completely eliminates the need for follow-up reading. The main purpose of the study of the behavior of the market price through the charts is to identify trends in price during the early times of development for the purpose of trading with the trend. In fact, most techniques used in this way is of the nature of the follow-up of trends, and that its intention was to identify trends and then follow-up to the current trend.
There is a natural result of the rule that prices move in trends is that the trend in the event of movement in a certain direction will continue to reflect that more than its direction, the natural result of this course is sponsored by Newton's first law of the movement. Alternatively we can describe this by saying the natural result that the trend will continue to persist, reflecting the way back. This is one of the principles of the technical analysis significantly. And how to deal with it is to trade with the trend predicted to show signs Banekash.
History repeats itself
A large part of the structure of technical analysis and study of market behavior is, in fact, a study of human behavior. As an example, look at charts and patterns that have been identified and classified for a hundred the previous year, it reflects the patterns of human behavior and found a picture of the situation of high and low psychological well-being of the market. In view of the good work of these patterns in the past, it is assumed that it would continue the same good work in the future. It relies on the study of human behavior, which always tends to bring them not to change and become usual. In other words can be interpreted that history is repeating itself the way to understand the future is by examining the past, or that the future is a mere repetition of what happened in the past.
