Introduction to Technical Analysis
Technical Analysis (TA) is the study SOLELY about PRICE ACTION. While fundamental analysts concern about the value of the company, Technical Analysts only cares about the charts and that’s why they are often called Chartists. Technical Analysts believe that everything is discounted in the price, hence, the price and of course supply and demand which determines the price are the only things matter.
Some basic assumptions of Technical Analysis:
1. The market discounts everything
2. Price moves in trend
3. History tends to repeat itself
I won’t spend much time discuss or argue any of these assumptions are correct or not. It has been already opened for debate by the greatest minds on this planet for a hundred year. And it doesn’t matter who is right or wrong, if you want to follow Technical Analysis, these are the assumptions you have to accept.
I know it might be hard at first. By the time you read all the 3 assumptions, you will start to wonder
“Then what the hell is the Random walk theory I learnt at school?” or “Are you sure this is an ideal world where Efficient market theory shows that the market discounts everything?”. But trust me, those questions are irrelevant here. They will only slow you down on the way to master the important knowledge and skill.
Maybe it’s a bit early but I feel the need to emphasize the importance of the second assumption” Price moves in trend”. In TA, we profit mostly on the trend, and only by riding the trend that we tremendously profit.
That’s all for the introduction. Let’s get to the meat of this website! I will try to keep all the lessons as short as possible cuz I’m a very lazy guy too :p
** If you want to read more about the history of TA, it is available for free all over the internet, try google and read it