What is technical analysis and graphical analysis?
The Technical Analysis by Charles Dow Theory, founder of Wall Street Journal, is based on three fundamental axioms:
The market takes everything into account (efficient market theory):
This is why technical analysts do not give much importance to the market data for all the information available in the market are already reflected in prices, according to this theory it is impossible to enjoy the effect of an ad.
Courses Follow Trends:
Following the historical charts of course, we realize that the market follows trends. This phenomenon is not only due to chance, technical analysis is based on the psychological analysis of crowds which she claims to be an application on the market. Equity markets, as a crowd of people can be taken in a dynamic optimism (or more, euphoria) or, conversely, in a dynamic pessimism (or worse, despair or panic ) or even phase hesitation. All of these dynamics are reflected in the market as increases, decreases or flat period.
History Repeats Itself:
The future is determined by the past market and the same "mistakes" always repeat (formation of speculative bubbles and crashes). Again, this idea stems from the psychological analysis of a crowd. That bubbles and crashes are recurring are the best examples of the existence of the principle of repetition.
Note that can become self-fulfilling because today analyzing a huge part of investors use these methods by following these concepts and by changing the way in this direction.