Technical Analysis And The Dow Theory

Technical Analysis has become very popular lately, many people believe that the historical data of prices is a strong indication to analyze price movements in the future because of price movement that is always repeated.
 
"Technical analysis is the study of market behavior is illustrated through graphs, to predict the trend (trend) price in the future." (John J. Murphy)

Traders who use technical analysis not believe that prices move randomly so that the price movements to predict whether the trend or pattern. Examples of images that form the pattern of price movement trend in EURUSD currency period September 2010

EURUSD price action formed trending up, and several times the price movements have reflected the level of support.

Besides moving based on trends, price movements also form patterns that can be learned. Here is an example EURUSD price action pattern display period from May 2008.

Price Movement EURUSD above as seen form a double top pattern.

Basic Technical Analysis The Dow Theory

1. The Market Knows Everything. Prices are going really reflect the whole information. Everything has been reflected through the supply and demand which in turn affects price movement. Since all information is reflected in the price, the price of what happens is the actual value of the existing events in the market

2. Price Move In Trend. All of the analysis agree that the price moves based on the trends and prices move in a certain period of random or random. Therefore technicalis  or people who use technical analysis believe that it is possible to identify trends, make transactions based on the trend and make a profit by exploiting the trend.

3. Trends Exist Until It Is Not Broken. Price movements in a certain time to form patterns of trends and conditions will change if the signal trend reversals (reversal) has been confirmed. Trait that emerged was the consolidation of the price or trading range that is located at the midpoint of the price or have a balance due to price pressures. If the price support and resistance in the movement has penetrated the price trend will continue whether it suffered a reversal or continuation price.

4. The History Repeat. The pattern is always the price move repeatedly because of human psychological measures to changes of supply and demand are also likely to repeat that something we learned about technical analysis is about the price patterns are always the same from time to time.

5. Has Three Market Trends. It should be understood that the price movements are built from short-term movements (minor), medium (intermediate) and long-term (major). With three movement patterns that help the traders in determining the proper timing to execute the transaction.

source: book the master trader