A chart trader, should be a believer. Believe in price. Believe that price tend to move in a unique rhythm, where the technical tools we apply, and experiments we do on a chart are our way to understand this unique rhythm.
"Why do prices bounce of a rising trend line? it's just a line mate? this is really silly, you technicians believe that price determination of assets depends on some lines , head and shoulders knees and toes patterns..."
Looking at technical analysis superficially without digging slightly inside will probably lead to that kind of conclusion.
Let me give a very small example:
The trend line, it's a very famous and one of the most fundamental tools in classical technical analysis. Looking at the trend line as a line where price bounces of, or reverse trend when it's broken is a bit of incomplete and very basic view of the tool.
I mentioned above that the price tends to move in a rhythm. It's the balance between supply and demand, buyers and sellers. Trading in an uptrend is a fact that demand is higher then supply and thus price moves higher. The slope of this supply/demand can be identified through the trend line, and thus the projection of that trend line will probably be accurate in determining turning point as long as the velocity of the supply/demand equation is still the same and haven't changed. A change in the velocity or slope of that equation will probably change the overall price tendency, and a significant change in that would probably lead to a breakout below that trend line and a change in the trend.
A trend line is not an exact point, in my view. It represent the approximate slope of the supply demand (although the continued use of the trend lines by market participants made a self-fulfilling prophecy of it and made it more accurate).
Have a look at the chart and enjoy.. Thank you for reading..
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You have writing skills, that was almost poetry...
rv
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indeed, very nice Tech, thx
Technician
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just trying :) ... Glad you liked it.
Technician
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Look at that, the price rebounds of that support again
Daniel.B
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Wow, it rebounded very well!
Technician
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Trend line Beauty
SwingAndPip
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Lines don't mean anything if there isn't fundamental follow through... ie RBNZ rate cut always a possibility and recovering oil prices
Technician
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I would like to quote a word from the RBNZ press conference yesterday,
"The assumption we make about exchange rates is very much a technical assumption, we have in our modelling prices a degree of mean reversion taking place in terms of exchange rates we make judgments about the speed of this mean reversion.
Other forecasters like the IMF AND OECD given that it's so hard to make any projections about the exchange rate. its often a random walk in terms of economics projections." RBNZ Governor Wheeler said..