A Simple Comment on the Three Fundamental Assumptions of Technical Analysis

A trader who uses technical analysis as a core tool for analyzing the market necessarily needs to agree with these three basic assumptions. If they cannot agree with these three assumptions, then the specific operation or system established on this basis lacks basic confidence. It is like a person who does not believe that he is a boy and goes to the men's toilet to relieve himself.

These three assumptions serve as the basic theory of technical analysis, helping generations of traders to work hard in the speculative market. As the old saying goes, theory comes first, and then practice. A rigorous trader, before choosing a school, must first have a detailed comparison and understanding of technical analysis and fundamental analysis, and then through their own practice results, can make a meaningful choice, unilaterally negating or criticizing a school, in addition to some psychological false sense of superiority, there is no other professional progress and benefits.

Market behavior is inclusive and digestible

In other words, the market price is always right. For traders, price fluctuations are the most direct thing in front of us. Traders give up exploring the reasons behind price fluctuations, and directly analyze and operate on price fluctuations themselves. This is a method of seeking closer to the distance. Many physical and mathematical problems are studied in this way (conceding to the deep causes allows the theory to develop in a practical sense, and then turning back to study the causes).

Prices evolve in a trending fashion

If you don't believe in trends, then go to the chart and look at them. Trends and fluctuations are like sunrises and sunsets. The market cannot be in trend forever. After the trend, there must be a shock. The market cannot be in shock forever. After the shock, there must be a trend. The trader cannot predict when the trend will come, but he knows that the trend will come. For the trader, the purpose of all analysis is to establish the statistical characteristics of the non-random part of the price fluctuation, and enter the market before the trend arrives, or enter the market during the development of the trend. (for the trend trader)

History will repeat itself

Developments in behavioral finance have shown us, irrefutably, that...History will repeat itselfThe argument is that although prices have no memory, people have memory, and it is people who grasp the market through their own psychological feelings, and deep-rooted cognitive biases in humans can lead to repeated market behaviors.

If you don't believe in history, then I ask you, what else can you use to study the market besides historical data?