Technical analyses: The study of past price to determine the most probable outcome in the future right? Well, that is how most traders see technical analyses. Another way of putting it is by saying that we analyse patterns and their behavior to recognize them in the present to know what they will most likely do in the future.
But what is patterns? Candlestick patterns, reversal patterns, price patterns, continuation patterns. They are nothing less than crowd behavior! They present buyers and sellers and in that basket of buyers and sellers are hidden knowledge, feelings, emotions, ideas, inside info etc.
It always surprises me that a trader will put up 3 or 4 indicators, cramping up all the info on the chart; that is exactly where the info lies, on the chart, in the candlestick, in the pattern! That is where you can read:
- Who is in control of the market.
- Who is the dominant decision makers.
- Who is selling/buying with aggression.
- Who is running for cover.
- We can even see how many participants there are and if they are sidelined or not!
I use one indicator and that is the Relative Strength Index. I use it to confirm divergence which in turn shows me when the bulls/bears lost strength in a rally/decline. Another indicator I can justify is Volume. Here I can bring in the COT to see where trading is overcrowded at tops and bottoms which also shows me reversal.
Let’s rather get behind the big role players, the banks, the institutions and buy and sell in the right direction of the market. Let us rather look at crowd behaviour hidden in price on your chart, learn to read it and join the trend to more profits!