InvestorQ : Is there any guarantee that the past patterns in the markets will repeat?
Swati Naik made post

Is there any guarantee that the past patterns in the markets will repeat?

Answer
user profile image
Ria Roy answered.
1 year ago


Unfortunately, in the stock markets there is no guarantee irrespective of whether you use fundamental analysis or technical analysis. This is just one approach that has worked quite well for traders over time. Technical analysis is the study of what has happened to the price of a security in the past with the expectation that history tends to repeat itself. That is how patterns are formed. Some patterns repeat after a week, some after a month and some after as long as 20-25 years. The chart patterns are used to study when such situations will repeat so that one can position the trade accordingly. Many of the charts patterns in technical analysis have been used for more than 100 years and they are still believed to be relevant because they illustrate patterns in price movements that repeat themselves. There is an interesting explanation why these patterns repeat themselves. It is believed that since humans who trade are the same and human psychology is also the same; their reaction to stimuli is approximately similar. That is what causes these chart patterns to repeat.