essential technical analysis

Financial markets, by their very nature, attract a wealth of high-caliber
individuals who are genuinely excited by their chosen profession. Their
enthusiasm and their willingness to share their knowledge makes belonging
to the community of traders, investors, and analysts a great
privilege. It is my experience that an hour spent listening to their stories,
or reading their insights, is often the equivalent to months of study in an
academic environment.
Most of these individuals are successful because they recognize, in a
way that academic analysis still does not, that asset price movements are
not just random fluctuations driven by the rational behavior of independent
traders. They recognize that human beings are, by nature, gregarious
and communicative, and have an inner drive to belong to groups. Not surprisingly,
therefore, group psychology provides a controlling influence over
individual activity and transforms a large quantity of apparently unrelated
decisions into a more certain outcome.
Importantly, this outcome reveals itself in the form of rhythmic, patterned,
price movements that bear not only a natural relationship to one
another but also are essentially predictable once they are understood. This
is why the discipline of technical analysis—hearing the message of the market
via price movements—is such an accurate tool for making profitable
trading decisions.
Furthermore, since markets essentially attempt to anticipate movements
in economic and social fundamentals, the accurate use of technical
analysis actually implies an ability to predict those fundamentals.
This is why technical analysis is such an important tool for making investment
decisions…. …

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