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C:02: Rationale of Technical Analysis:

1. Market action discounts everything. (i.e. Fundamental, political, psychological or otherwise )

2. Price always moves in trend.

3. History repeats itself. (The future is just a repetition of past )

Concept 1: Technical Analysis:

It is the study of market price action and psychology, primarily through use of charts, for the purpose of forecasting future price trends.

Price and Volume information are mainly used to forecast.

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Technical Analysis(TA) is superior to Fundamental Analysis(FA) for trading. FA tell the Value, where as TA tell the Price. The fundamentalist studies the cause of market movement, while the technician studies the effect.

Price often acts as a leading indicator of fundamental reason.
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Technical Analysis is an Art. To be an Artist, First you need to know.. how to use Paint Brush and Canvas. Secondly you need to know the peculiarities.

When a Technical Analyst with half knowledge get deceived by market moves, he often blames the News.

By blaming the News, he often forget the very first Golden rule / assumption of Technical Analysis.

"Market Action Discounts Everything.( Fundamentally, Politically, Psychologically or otherwise such as Insider trading, Climate change, Wars, Epidemic or Pandemic) "

Anything that is known or unknown to general public, all are reflected in price charts.

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Most of Technical Analyst believe that there is no Holy Grail to make profit in Financial Market. But we do believe in Holy Grail.

Holy Grail is the Knowledge of Technical Analysis. You can get the Holy Grail by only learning and practice.

There are lot of technics to make profit. But to make consistent profit, you can follow only one.

Also remember half knowledge is more dangerous than ignorance.

As Bruce Lee rightly said " I fear not the man who has practiced 10,000 kicks once, But I fear the man who has practiced 1 kick 10,000 times.

"All you need is one pattern to make a Living"- Linda Bradford Raschke (American financier, operating mostly as a commodities and futures trader.)

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A ( Problem, Solution ) Pair.

What is it means? There will not a problem without a solution And there will not be a solution without a problem.

Best example: Pandemic. COVID19 Virus. So it was our problem. It also gave us the solution to fight. Vaccines are made from dead COVID19 virus.

Pattern always come in pairs. You just need to find the solution. If you find the solution, you will get an opportunity and if you don't find, you will be punished. That is how... It works.

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It will motivate us.

Is this not true ?

In Financial Market, you need to know both side as a Buyer and Seller to make profit. Buyer need the financial instruments and Seller need the money.
Both of them want more of it, But they have limited supply. Once Buyer purchased the financial instrument, he become a seller.

If price is less, Buyer will buy more quantities expecting that the price will go up And Seller will sell more quantities expecting that price will go down in future.

And if you are wondering, Why sellers will sell more when price is less… then you are wrong.
As a common people, we don't know the sellers behavior.

It is because of Fear of loosing money, If price of that instrument falls more than his expectations.
The level of fear is amplified, If economic factors are bad.

At that time, New Buyers will not buy. There will be only supply without any demand.

If you are thinking .. Price will fall if Economic factors are bad.. Then you are wrong again. Price will increase faster till the demand comes in.
Of course, there will be temporary fall before the rise.

That is what happened, when lock down declared during pandemic.

"Why do we fall? So that we can learn to pick ourselves back up.” - Batman Begin Movie Quote

If Economic factors are still bad after the rise in price, price will fall.

On the other hand,

If price is more, Buyer will buy less because he has limited money.
And Sellers will sell less quantities expecting that price will go up in future.

Again, Why Sellers will sell less if price is more… It is because of Greed, If price of that instrument is increasing he will be greedy and reduce the supply.

Once supply is reduced, price will fall, till demand for that financial instrument comes in. But before the fall that there will be a temporarily sharp rise.

If economic factors are good, Price will fall more sharply, till economic conditions become bad again.

Like any other market, Financial Market is also always influenced by these 6 main factors (Demand, Supply, Quantity, Fear, Greed, Money/Capital, Economic factors).

These 6 factors CAN NOT be balanced at all together.

So it is a non-linear equation that makes it difficult to predict.

There comes the role of Government. They form policies and laws to balance these up to some extent.

All these concepts are from Economics. Economics is considered as a modern science which was developed in 18th Century. Although It was very theoretical at that time, due to technological constraint. Now it is very much practical. We use it daily without knowing it.

You think that you know it. But you don't know that you that you don't know.

On the other hand.

To Become A Technical Analyst you don't need to know All the above paragraphs. Theory is very boring right ?

You just need to know that
"The interaction between buyer and sellers create a behavioral price Pattern. Which can be predicted well in advance."

And Technical analysis is an Art. you just need eye to see it.

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Hi...

Today topic is about Technical Chart.

So what is it...

It is the Graphical representation of Price Action of a Financial Instrument over a period of time.

Remember, In my last post. I told that we can see Demand and Supply forces.

Through Technical Chart, we can See it.

Remember, In School and Colleges.. we used to prepare Graph Manually. It is exactly the same.

But at that time, we didn't know how to use in real life.

Thanks to our technology, we don't have to prepare that Graph Manually.

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Thank You!

Hi...

I just read the news that...

Dow Futures Surge 385 Pts; Tensions Ease on Russian Withdrawal Report.

Russia's Defense Ministry said earlier Tuesday that Russia will return some of its troops to their bases after completing a series of drills near the Ukrainian border later this week.

Do you feel that this is the reason, Dow Increased today ?
What if if they start one more Drill ? Dow will fall ?
If you think so , then you are wrong.

Market always moves by law of Demand and Supply

Learn… How to See the flow of Demand and Supply by Technical Analysis. YES YOU CAN SEE THE FLOW.

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