The three main assumptions of technical analysis are that market behavior is all-inclusive, that it evolves in a trend manner, and that history repeats itself. These assumptions form the theoretical basis of technical analysis and help us understand market behavior and future movements.
First of all, the market behavior is inclusive of everything, which means that all factors that may affect the market, such as fundamentals, politics, psychology, etc., will be reflected in the market. Therefore, technical analysts only need to focus on the changes without delving into these factors.
Second, it evolves in a trend fashion, which means that it tends to continue in a certain direction for a certain period of time. By identifying these trends, technical analysts can move in the future.
Finally, history repeats itself, which means that market behavior and trends are repeated over a certain period of time. By studying historical data, technical analysts can find similar patterns and thus future movements.
However, technical analysis is not a panacea, and it has its limitations. For example, market behavior can be affected by unexpected events, resulting in volatility that cannot be achieved. In addition, technical analysis does not explain the root causes of fluctuations, but only describes the phenomenon.
In conclusion, technical analysis is a useful tool that can help us understand market behavior and future movements. However, it is not a panacea, and investors should combine other analytical methods, such as fundamental analysis, to make a more comprehensive judgment. At the same time, investors should also be cautious and not rely too much on technical analysis to avoid falling into mistakes.