FEW IMPORTANT TECHNICAL ANALYSIS PRINCIPLES- Technical Analysis deals in probabilities and never certainties.
- Markets rarely discount the same thing twice.
- Technical analysis is applicable across all time frames, from minutes to several years.
- Longer the time span of the trend the easier to identify reversal.
- Following factors influence Price :- Physiological , Technical, Economic and Monetary.
- Transition between rising and falling trend is usually signaled by price patterns.
- Volume usually leads price.
- Technical signal often fail more if it is taking in opposite direction to the main trend.
- Trend-lines are dynamic areas of support and resistance.
- Violation of the trend-line with sharp angle of ascent or descent is more likely to results in a consolidation than a reversal.
- Significance of Trend-line is function of its length, number of times it has been tested (touched) and the angle of ascent of descent.
- Oscillator's behave in different ways depending on the direction of the primary trend.
- Divergences only warn of a weakening or strengthening of technical conditions, they do not represent actual buy or sell signals
- Greater the number of negative divergences the weaker the structure and vice versa.
- When Trend-lines on price & oscillator's are violated simultaneously signal is stronger.
- Candlesticks given greatest emphasis on the opening and closing prices of trading range.
- Support and resistance levels represent intelligent places for anticipating trend to reversed.
- Time is concerned with adjustment as longer the trend takes to complete, greater is its logical & physiological acceptance greater the necessity for prices to move in opposite direction and adjust accordingly.
- Greater the number of securities moving in the same direction, the strong the trend.
- It is level of enthusiasm of buyers or sellers that determine the course of prices.
from "Technical Analysis Explained" by Martin J. Pring.
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