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Despite being inundated with data, charts, volume, statistics, etc., technical analysis is really about studying human behavior – specifically the behavior of investors with respect to fear and greed. Over time, these repeatable patterns and cycles can be plotted and tracked to predict future possible price movements on a consistent basis.
Thus, a stock’s price change over time is the most accurate record for the emotional state of market participants.
Remember, there are literally thousands of indicators that traders can use in technical analysis, and there is really an ever growing number because traders are always inventing new ones to fill current gaps. Options traders that have the most success tend to stick to an approach that focuses on a handful of reliable indicators.
And there’s a lot more to discover about effective technical analysis trading, so take a second to sign up for free options trading course from Option Alpha to learn more.