There are three basic rules on which technical analysis is based.
To achieve success you must understand them and, above all, believe in them. If you don't do it, you can forget about success.
In my life I met with many people who were quite inclined aggressively for technical analysis.
This is their right. However, I am amused when someone denies something even though he has never actually read it.
I will say even more, noone has no idea about it at all. In my life I try to follow the principle that I don't deny anything until I know it well.
I value fundamental analysis although I don't think it is more effective than technical analysis.
I know while it is much more labor-intensive, so that's why I prefer analysis technical.
Let me now move on to the three rules that form the foundation of technical analysis.
Rule No. 1
The market discounts all information.
This means that for any company course, all information available on the market about it is already included in the price. All financial results, announcements, even rumors available on the market are already included in the course. Therefore, it makes no sense under their influence to make decisions. The best thing about this assumption is that skilful analysis of charts can give us a signal about positive or negative fundamental information that is yet to appear. It is well known that investors who roam the market they use confidential information and buy or sell shares before making the information public. This capture of strange market behavior can be very profitable. I must admit that this is my favorite occupation in the whole process of analyzing charts.
Rule No. 2
People behave similarly when dealing with similar events
Technical analysis is an analysis of the psychological behavior of the crowd. Different types of formations prices are repeated because the crowd often repeats their behavior.
Just like in everyday life. If the national team is successful in some sport, then most of the country's residents go out into the streets, sing, dance and enjoy. Sometimes even breaks are announced to watch the next matches. However, if the opposite is the case then no one can even mention at least one player's name from the team. Nobody is interested in this, and the fiercest fans are critical and aggressive towards players and the coach.
This is human nature and most people can't change it. This process is still repeated and the situation is similar on the stock exchange. Although some people will be able to recognize this behavior, see the "market formation" on the chart and it
use it, and most will do the same. This is human nature!
Rule No. 3
Financial markets are either trending or consolidating
This is the most important rule!
Surely you know that we can set three types of trends: increasing, decreasing and side.
I can guarantee you that any of the listed companies is in any of these three trends.
That is why every technical analyst should play with the trend, because that's it guarantees success.
There is a saying in the USA, "Trend is your friend."
