Forex

Major bull and bear markets result from fundamental changes in supply
and demand. Fundamental analysts follow crop reports, study the actions ,
of the Federal Reserve, track industry utilization rates, and so on. Even if
you know those factors, you can lose money trading if you are out of touch
with intermediate- and short-term trends. They depend on the crowd's
emotions.
Technical analysts believe that prices reflect everything known about the
market, including all fundamental factors. Each price represents the consensus
of value of all market participants - large commercial interests and small
speculators, fundamental researchers, technicians, and gamblers.
Technical analysis is a study of mass psychology. It is partly a science and
partly an art. Technicians use many scientific methods, including mathematical
concepts of game theory, probabilities, and so on. Many technicians use
computers to track sophisticated indicators.
Technical analysis is also an art. The bars on a chart coalesce into patterns
and formations. When prices and indicators move, they produce a sense of
flow and rhythm, a feeling of tension and beauty that helps you sense what is
happening and how to trade.
Individual behavior is complex, diverse, and difficult to predict. Group
behavior is primitive. Technicians study the behavior patterns of market
crowds. They trade when they recognize a pattern that preceded past market
moves. Political poll-taking is a good model of technical analysis. Technicians and
poll takers try to read the mass mind. Poll takers do it for political gain, technicians
for financial gain. Politicians want to know their chances of being
elected or re-elected. They make promises to constituents and then ask polltakers
about their odds of winning.
Poll takers use scientific methods: statistics, sampling procedures, and so
on. They also need a flair for interviewing and phrasing questions; they
have to be plugged into the emotional undercurrents of their party. Poll-taking
is a combination of science and art. If a poll taker says he is a scientist,
ask him why every major political poll taker in the United States is affiliated
with either the Democratic or Republican party. True science knows no
party.
A market technician must rise above party affiliation. Be neither a bull
nor a bear, but only seek the truth. A biased bull looks at a chart and says,
"Where can I buy?" A biased bear looks at the same chart and tries to find
where he can go short. A top-flight analyst is free of bullish or bearish bias.
There is a trick to help you detect your bias. If you want to buy, turn your
chart upside down and see whether it looks like a sell. If it still looks like a
buy after you flip it, then you have to work on getting a bullish bias out of
your system. If both charts look like a sell, then you have to work on purging
a bearish bias.