Basic Assumptions in Technical Analysis


1. The Market Discounts Everything: Technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company- including fundamental factors Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately.

2. Price Moves in Trends: In technical analysis, price movements are believed to follow trends. Technical analysts believe that once a trend gets established, price movements are more likely to be in the same  direction.

3. History Tends To Repeat Itself: Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.