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Technical analysis has been around for as long as there have been organized markets in the form of
exchanges. But the trading community didn't accept technical analysis as a viable tool for making
money until the late 1970s or early 1980s. Here's what the technical analyst knew that it took the
mainstream market community generations to catch on to.
A finite number of traders participate in the markets on any given day, week, or month. Many of these
traders do the same lands of things over and over in their attempt to make money. In other words,
individuals develop behavior patterns, and a group of individuals, interacting with one another on a
consistent basis, form collective behavior patterns. These behavior patterns are observable and
quantifiable, and they repeat themselves with statistical reliability. Technical analysis is a method that
organizes this collective behavior into identifiable patterns that can give a clear indication of when
there is a greater probability of one thing happening over another. In a sense, technical analysis allows
you to get into the mind of the market to anticipate what's likely to happen next, based on the kind of
patterns the market generated at some previous moment.
As a method for projecting future price movement, technical analysis has turned out to be far superior
to a purely fundamental approach. It keeps the trader focused on what the market is doing now in
relation to what it has done in the past, instead of focusing on what the market should be doing based
solely on what is logical and reasonable as determined by a mathematical model. On the other hand,
fundamental analysis creates what I call a "reality gap" between "what should be" and "what is." The
reality gap makes it extremely difficult to make anything but very long-term predictions that can be
difficult to exploit, even if they are correct.
In contrast, technical analysis not only closes this reality gap, but also makes available to the trader a
virtually unlimited number of possibilities to take advantage of. The technical approach opens up many
more possibilities because it identifies how the same repeatable behavior patterns occur in every time
frame—moment-tomoment, daily, weekly, yearly, and every time span in between. In other words,
technical analysis turns the market into an endless stream of opportunities to enrich oneself.

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