Technical analysis can be divided in two major categories: objective and subjective. Subjective technical analysis is defined by methods and patterns that are not clear, and a conclusion from this type of method reflects the personal interpretations of the analyst. This creates the possibility that two analysts applying the same method to the same data can have different conclusions. Because they come from personal experience, these methods are not testable. Subjective technical analysis cannot be called wrong, this would have been in the case when it can be tested and rejected by evidence. Nevertheless, if you ask traders about it, many of them will strongly believe in their own subjective analysis. This is a consequence of the erroneous beliefs.
The human mind is built to look for and find patterns, even if they are just an illusion. Human nature is repulsed by the new, unpredictable and unexplained, so our mind tries to seek order and patterns. Acquiring knowledge can fail in the following ways: learning falsehood or failing to learn the truth. Of these two, the mind is more keen on adopting falsehood.
Cognitive phychology is concerned with how humans process information, draw …
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