Investing is not just about technical analysis

The main body of technical analysis research is a market limit that can be reached by the market and the psychological activities of the people who trade in it, its form and rhythm of movement, and its direction of movement. Therefore, to this extent it is closer to the truth than fundamental analysis, because it is closer to the market itself, which also constitutes a level that technical analysis can achieve in daily trading. Fundamental analysis is difficult to achieve.

Of course, there is also a reason because technical analysis is to some extent more focused on quantitative analysis, while fundamental analysis is more focused on qualitative analysis. In terms of trading, especially in the foreign exchange market where financial leverage is used a lot, quantitative analysis is often more practical than qualitative analysis.

But while we see the strengths of technical analysis, we must always remember that the market determines technical analysis, rather than technical analysis determining the market.

We often see some very classic K-line chart patterns, such as head and shoulders top and bottom patterns, as well as many very classic finishing patterns. What I want to express is not the classic top and bottom pattern that caused the market to decline, but the formation of these classic patterns during the process of market decline.

Market buyers and sellers will have a very subtle psychological mindset about the current price position over a period of time, mixing various news and data, and the overall market crowd will react differently, and then feed back to the market and eventually lead to changes in the trading power of buyers and sellers. For the market, as long as the buying power is greater than the selling power, no matter what kind of news and data, the market will definitely rise.

But these data and news will slowly affect the market trading crowd's reconsideration of their position, and finally in turn affect the overall relationship between this buying and selling power. In the process of this power transformation, we will see these classic patterns in technical analysis. So, it is not because the M head caused the market to fall. But the market decline must go through such a process, buying gas from strong to weak, selling gas from weak to strong. The head and shoulders just show that the transformation process is a little more complicated, buying power and buying gas are a little stronger than the M head. And the V-shaped top shows that the transformation of buyers and sellers is more sudden and rapid because of the price position and the intervention of certain factors.

The corresponding consolidation pattern actually means that the two sides of the market are roughly balanced in a certain fluctuation space by power in the transaction, but the inconsistency in the trading direction eventually evolves into a process of agreement. And this agreement eventually leads to the original balance of power between buyers and sellers in a trading range to a new imbalance, which is finally reflected in the market, achieving a breakthrough in the traditional sense of technical analysis.

The process of transforming this trading perspective from different to the same will inevitably lead to some form of price convergence pattern, which leads to the widespread arrangement of various triangles that we can see. Others, such as spread triangles and rectangles, do not work very well after their final breakout, and often see breakouts fail. This actually reflects that the views of both sides of the market transaction are not effectively aligned in this process.

Of course, the actual market situation may be more complicated than I described. Take the sharp rebound of the US dollar from last week to this week as an example. Even if I don't consider technical analysis, I can understand that the possibility of the US dollar falling back in the first half of this week is very small, but some analysts have come to the view that the US dollar will definitely fall back through technical analysis. The actual trend proves that my non-technical analysis conclusion is relatively more in line with the actual market trend, that is, the US dollar will not fall back easily until it sees a new high. Maybe most technical analysts have forgotten the market reasons behind such a large-scale rise in the market.

It will always be the market that determines the market, not technical analysis that determines the market. This statement leads us to the question of what the market is, and we must remember that the market is a place where a certain group of people plays a game that does not generate wealth in itself, but only completes the transfer of wealth.

All the gamers who entered this venue hoped to gain property through this venue rather than lose it. But the final result would always be different from what most gamers thought. The market would always complete the transfer of wealth smoothly, and the completion of this transfer process must indicate that at least 70% of the investors ended up wrong and lost money, and their property was redistributed.

Imagine that it's not easy to get the elites of these groups to be willing to be allocated. The only thing the market can do is get people wrong in various ways. Deception, deception, deception, use, use, reuse will always be the only theme of the market. The "zigzag" adjustment we see at the bottom generally responds to investors who are already accurate in their judgment of the market.

Ultimately, the best portrayal of losing confidence and patience due to frequent up and down price movements, and shorting and inducing more corresponds to the process of making some investors in the market lose patience and confidence. Therefore, what matters is the market itself. When we enter the field of technical analysis, we must remember that it is just a means and tool to help us understand the market, and the most important thing is still the market itself.