The concept central to technical analysis is that price is the outward expression of all factors fundamental, be they known or unknown. The short version of this idea is that “price discounts everything”.
Acceptance of this notion, compels a deeper look into price. On various levels, price can be interpreted as a number. Any given number, by definition is an element or a member of set. In turn a particular set could define a number system. Think of a number system as analogous to a stellar galaxy, the building blocks of which are individual stars. However in a number system the individual components are numbers. Each individual number, has it’s own unique characteristics, which when combined with all the other numbers of the system determine the net characteristic of that system.
Conceptually, attempts to navigate in and about any given system, be it stellar or numerical, requires a map. A practical benefit of “system” navigation, might be for example, that you desire some sort of exploratory excursion or trip. Specifically, where numbers are concerned, and in particular with a recognition of their “building block” status of the systems that they make up, one may choose to learn more about Fibonacci numbers and their ratios, which in turn may increase the reliability of analysis. Seizing upon the Fibonacci sequence as just one example, of a numerical analysis, it turns out that there exists an extraordinary infinite series, which acts as a generating function of all Fibonacci numbers, at once.
This is altogether different than dependence on the intrinsic additive property of the series itself, to determine a given Fibonacci number. This infinite series may be thought of as sort of an encryption key, or map that facilitates a more complete surveilance of the “number system”, which again could at least indirectly, translate to a more prescient technical analysis.
To learn more about the role numbers can play in technical analysis, tune into the webinar, I will present this Saturday (08/02/14) at 9:00 am PDT.
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