First, market behavior reflects everything.
People's understanding of anything, even if it is very indirect with finance, will flow into the stock market in the form of information. The stock market reflects the changes caused by the perception of information through its own price changes.
Simply put, any news, whether good news or bad news, will eventually be reflected in the change of stock price, which is the basis of technical analysis.
Second, the change of price trend.
According to the dynamic laws of physics, the trend will continue until there is a reversal.
In fact, although the price fluctuates up and down, it is moving in a certain direction after all. Therefore, technical analysis hopes to use graphs or indicators to determine the price trend, find the signal of reversal as soon as possible, and thus seize the opportunity of trading.
Trends can be divided into three categories: upward trend, downward trend and no trend (that is, consolidation shock).
According to the time division, each trend is divided into three types: long-term trend, medium-term trend and short-term trend.
Then combined, the trend will be clear, for example: the long-term upward trend is a bull market; The long-term downward trend is a bear market; The short-term upward trend is rebound; The short-term downward trend is a callback and so on.
Note that the so-called long-term, medium-term and short-term are just general concepts of time, and each trader has a different definition of time.
Just like a long-term trader, the long term may be five or six years, but for an ultra-short-term trader, two weeks is a long term.
Therefore, when studying long-term, medium-term and short-term, we must make clear the time unit, specifically to the day, week, month and year.
Third, history will repeat itself.
This is considered from the psychological factors of people. Trading is nothing more than a pursuit. No matter yesterday, today or tomorrow, this motivation will not change.
Therefore, in this psychological state, the transaction will tend to a certain pattern, leading to a repeat of history.
Therefore, the past price changes may continue to occur in the future, which is worth studying. Using the method of statistical analysis, we can find some rules and sort out a set of effective operating principles.
For example, head and shoulder soles, curved soles, triangles, wedges, etc. have all appeared before, now and in the future.
History will repeat itself, which is the core of the effectiveness of technical analysis.