This Element is an excerpt from Technical Analysis Plain and Simple: Charting the Markets in Your Language, Third Edition (ISBN: 9780137042012) by Michael N. Kahn. Available in print and digital formats.
Why technical analysis works: a quick, easy-to-understand look at the underlying theory.
Investors and speculators react the same way to the same types of events again and again, and this is reflected in the ebb and flow of prices. If one charts this activity over time, patterns emerge. Some of these patterns comprise standard technical analysis, whereas others are created by analysts, based on their own observations and calculations....