For its part, the technical analysis from a financial rather simple principle: at a time T, the course of a title accurately reflects all available information on such, its entire history. This is because time is continuous, any variation of the course leading to the identification of a new level, which itself will be the base for new variations. Therefore, it is possible to be based on prices at different levels to try to determine the future most likely. However, this determination of meaning and magnitude of change is not easy. Indeed, it is fast enough that the psychological effects (eg related to the effects of thresholds or the behavior of individuals in relation to trade) can be just as important as purely technical considerations. Therefore may appear different opinions on the basis of similar information yet. It is on this same principle itself that the determination is based courses, which reflect a consensus among market positions and short positions.
Technical analysis does not therefore, as such, to determine specific reasons for the change of course but rather to measure the evolution of them and, if possible, to determine their likely future behavior.
This approach allows to take greater account of the psychology of traders.
Indeed, the movement of rising and falling markets are almost always based on trends, more or less long term. These are based on the approach of investors in securities, pessimistic (bear) or optimistic (bull). The situation is characterized by optimism over the ever-rising even as the fundamentals do not justify the increase. The ratios are increasing, which may lead analysts to withdraw securities.
However, it is often during these trends increase as individuals gradually convinced of the value of positioning itself to buy, while the upside potential is much diminished. This observation reflects the herding effect of the market and hence the interest to be among the first beneficiaries of the movements.
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