Here's a little post about something many may not understand or conceder, when looking at a chart or graph. Your looking at the masses sentiment & psychology.
When you look at price direction, you need to think sentiment.
When you look at chart patterns, you need to think sentiment.
Sentiment
noun
1. an attitude toward something; regard; opinion.
2. a mental feeling; emotion: a sentiment of pity.
3. refined or tender emotion; manifestation of the higher or more refined feelings.
4. exhibition or manifestation of feeling or sensibility, or appeal to the tender emotions, in literature, art, or music.
5. a thought influenced by or proceeding from feeling or emotion
Charts are basically pictures of sentiment. Price direction is the most resent sentiment and chart patterns the culmination of sentiment over time, which projects possible action of future sentiment. Resistance and support are upper and lower value sentiments and gaps are high emotion changes in sentiment. Trend is continuous positive or negative sentiment.
Understanding all this will help one understand what's happening to price and why.
The pshycology of trading is also an important part of trading stock.
TA indicators are graphs of chart change. They measure direction and change and plot points on a graph, to aid with determining the phycology behind the chart sentiment. They show strength and weakness of trend, momentum, and volume.
Psychology
noun,
1. the science of the mind or of mental states and processes.
2. the science of human and animal behavior.
3. the sum or characteristics of the mental states and processes of a person or class of persons, or of the mental states and processes involved in a field of activity: the psychology of a soldier; the psychology of politics.
4. mental ploys or strategy: He used psychology on his parents to get a larger allowance.
The two; charts and technical indicators (sentiment and psychology) is what the Technical Analyst is all about. We see humans in the TA & charts. Since analyst are thinking sentiment and psychology, not static points on charts and graphs, a good one can evaluate future expectations at a glance.
I've been thinking about this distinction lately and thought I'd try to explain it to the board. In the hopes it may help some trying to learn TA & charting. Because I'm not sure many understand the distinction. There are human actions creating the TA & charts we look at. The goal is to analyze human action, not plots or points on charts and graphs.
One should always be thinking what are the people saying to you. Are they telling you what they may do next? And why do you think that. If you can't explain why the graphs and charts are telling you projected action with logical reasoning. Don't trust your evaluation and look closer.
As you go threw the process of looking at long, mid and/or short term charts, then check your trend, momentum and volume indicators, try to see all positive and all negative things present. Then list them for over all analysis. Try to not inject your personal sentiment & psychology on the evaluation by leaving bad or good things out. We often find we do that subconsciously.
AI
