Forex

An individual has a free will and his behavior is hard to predict. Group
behavior is more primitive and easier to follow. When you analyze markets,
you analyze group behavior. You need to identify the direction in which
groups run and their changes.
Groups suck us in and cloud our judgment. The problem for most analysts
is that they get caught in the mentality of the groups they analyze.
The longer a rally continues, the more technicians get caught up in bullish
sentiment, ignore the danger signs, and miss the reversal. The longer a
decline goes on, the more technicians get caught up in bearish gloom and
ignore bullish signs. This is why it helps to have a written plan for analyzing
the markets. We have to decide in advance what indicators we will watch
and how we will interpret them.
Floor traders use several tools for tracking the quality and intensity of a
crowd's feelings. They watch the crowd's ability to break through recent
support and resistance levels. They keep an eye on the flow of "paper" -
customer orders that come to the floor in response to price changes. Floor
traders listen to the changes in pitch and volume of the roar on the exchange
floor. If you trade away from the floor, you need other tools for analyzing
crowd behavior. Your charts and indicators reflect mass psychology in
action. A technical analyst is an applied social psychologist, often armed
with a computer.