Year 897 A.D.
A little boy named Khavel is born in a small village, a village run by a cruel, selfish chief.
Growing up, he is exposed to the common belief of the village, a story, a predicted future, a prophecy told among the villagers. A beacon of hope. A genuine belief that a physically overpowered child would be born, grow up, overthrow the current chief, become the chief himself and bring incredible wealth to the village.
Khavel is interested in this story so much, he loves this idea of “savior” so much that he wants to be like that hero figure. He trains hard starting from his childhood.
When he’s finally a grown man of 25 years old, he notices he now has immense physical strength and dexterity. Now he has his own woman, own children.
One night, after Khavel tells the prophecy to his own children for the 985th time and puts them to sleep, he starts his physical strength training routine.
While training, “That savior is super cool. I wish I was him, I wish that I would be the one to save this village.” Khavel thinks to himself. He packs a punch to a thick tree, breaking it in half. He looks at his hands. He thinks to himself. “Maybe I am…”
Next day, believing that he is the savior now, he goes to the village chief’s tower. Destroys the chief’s guards, and faces the chief at last. Khavel tears the chief in half, he declares himself the new chief.
He discovers all the gold, food, richnesses kept by the previous chief behind a locked gate in the tower. He distributes everything equally to all the villagers.
Years pass by.
Village now rich.
Villagers rich.
Khavel good.
Chief nice.
Years pass by.
Hard climate conditions.
Famine.
Khavel good chief,
But people poor.
Khavel’s children hungry.
Khavel hungry.
Many die.
Khavel somehow survive.
Khavel super sad.
Khavel wish he kept more food for his family.
Years pass by.
Climate fine.
Soil rich.
Plants much.
Food good.
Khavel now cautious.
Khavel paranoid.
Khavel selfish.
Khavel store food.
Khavel prepare for hard times.
Villagers poor.
Khavel seem evil.
Villagers tell prophecy,
That a hero would come.
Overthrow Khavel,
Distribute the wealth.
A child grows up listening to the prophecy.
He trains.
He trains hard.
Years pass by.
He realizes one day,
He might be the one.
The child grows up.
He strong.
He fine.
He overthrows Khavel.
Distributes the wealth.
Villagers rich.
Villagers fine.
Climate conditions hard.
Bad soil.
Famine come.
The new chief loses child.
The new chief loses wife.
Years pass by.
Soil rich.
Soil fine.
Plants fine.
New chief sad.
New chief stack food and prepare for hard time.
Villagers think new chief evil.
They tell prophecies.
That one day a child would be born.
Save the whole town…
Is technical analysis a legitimate price action indicator? Well, it’ll certainly have an effect on the price because of the people who believe that it is a legitimate price action indicator and take actions based on technical analysis. If people believe that a certain price is a support, people will tend to keep it a support by making buys at that price (or it’ll take extra big movements to break the support than it normally should).
Technical analysis is a self fulfilling prophecy. When khavel buys a coin at 40$ and there is a resistance at 50$, Khavel will tend to think that that’s where the rejection will happen and that it is a good spot to take profits from his long positions. Most people will think that way, resulting in 50$ not being broken upwards and remaining as a resistance point.
I’ve had times when I thought of technical analysis to be full of bullshit. I thought that price actions happened because of fundamental phenomenons such as the tech behind the coin being good, current political balance of global politics, FED meetings’ statements, current interest rates in certain countries and certain banks, china being china again etc.
I still think that technical analysis is completely bullshit. A bullshit that functions very well. Fundamental analysis part still creates the basis of my price analyses. However, it helps greatly to utilize technical analysis.