Assumptions Associated with the Theory of Technical Analysis Training

A
majority of active investors or initial traders do not have an adequate
understanding of technical analysis before they start using it. Therefore, it
would be in your best interest, to begin with, the basic question –What
do you understand by technical analysis? It
would be best described as a process of analyzing security dependent on
statistics inclusive of chart patterns, volume, and the previous price data. Technical
analysis training would entail the usage of oscillators and indicators, volume
analysis, price patterns, and charts looking forward to predicting and
profiting from price movement in the future. It
would be worth mentioning here that fundamental analysis would be different
from technical analysis. It emphasizes only the charts and ignores various
aspects such as price to book ratios, revenue in the future, earning numbers,
and anything associated with the intrinsic security value. Assumptions
of technical analysis theory When
it comes to understanding the theory of technical analysis, rest assured it has
been based on three assumptions. Let us delve into these assumptions. 1.
Everything you know about security has been represented directly by its volume
and price on the chart According
to technical analysts, it would be redundant to do any type of fundamental
analysis. The major reason for their belief would be that all significant
information about the security is known beforehand and the volume and price on
the chart would determine their bias. The
best example of such practice would be day traders, as they use technical
analysis only to decide on trading decisions. They would not be bothered by
anything they come across on the chart apart from the price action. 2.
Historical chart patterns could be used for determining prospective price
movement in the future As
history repeats itself, the chances of historical pattern charts being used for
determining the prospective price movement in the future would be relatively
higher. Here, technical analysts would determine that traders tend to repeat
the behavior of their predecessors. In
case, plenty of traders looking forward to purchasing ABC stock trading at
fifty dollars would be based on the belief, if ABC trades at the same price
again would allure more buyers and traders missing on the trade initially would
ensure to get into the stock the second time. Technical analysis would aim to
determine price movement in the future along with locating trading
opportunities based on repetitive methods of patterns. 3.
The trending markets Last,
but not least, the trending markets would be the final assumption.
Consequently, after the establishment of a trend, the chances of price movement
in the future continuing in a similar direction as a trend would become
significantly higher. It
would be worth mentioning here that technical
analysis training would be based on the final assumption. Traders and
technical analysts would look forward to locating the trend along with the most
common trading methods. To sum it upGathering
adequate knowledge about technical
analysis course and the theory behind their work would help you learn and
apply a few techniques to your specific trading needs.