CHAPTER 1
Introduction to the Art and Science of Technical Analysis
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
- Understand the key concepts underlying technical analysis
- Identify the different forms of chart analysis
- Describe the objectives of technical analysis
- Understand what subjectivity means in technical analysis
- Recognize the strengths and weaknesses of technical analysis
- Categorize market participants according to style and time in markets
- Identify the various styles and approaches in technical analysis
Technical analysis is a fascinating field of study. It is as much science as it is art. Its main strength is that a lot of it is visual, giving practitioners a better feel of the underlying dynamics of the markets. We shall also be looking at the various challenges to technical analysis, their resolution, and how technical analysis affects trading in general. The classification of technical approaches, market participants, and various markets will also be discussed in detail.
1.1 MAIN OBJECTIVE OF TECHNICAL ANALYSIS
It is generally accepted that human beings are born with certain instincts, tempered and molded by evolution via the passing of time. Every human being strives and seeks to fulfill these powerful instinctive forces.
The three main motivational instincts are:
- The instinct to survive
- The instinct for comfort
- The instinct to propagate
The instinct to survive is probably the strongest and most overpowering. Survival almost always ...
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