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Technical analysis has been a part of organized markets since their inception in the form of exchanges. However, it wasn't until the late 1970s or early 1980s that the trading community recognized technical analysis as a valuable tool for making profits. The technical analyst understood something that took the mainstream market community generations to grasp.

Each day, week, or month, a finite number of traders participate in the markets. Many of these traders engage in repetitive actions in their pursuit of financial gain. In other words, individuals develop behavioral patterns, and when a group of individuals consistently interact with each other, collective behavior patterns emerge. These patterns can be observed, measured, and they exhibit statistical reliability. Technical analysis is a methodology that organizes this collective behavior into recognizable patterns, which can provide insights into the likelihood of certain events occurring. Essentially, technical analysis allows one to gain insight into the market's mindset and anticipate future developments based on past patterns.

As a method for predicting future price movements, technical analysis has proven to be significantly more effective than a purely fundamental approach. It keeps traders focused on the current market conditions and how they relate to historical data, rather than solely relying on logical and reasonable expectations determined by mathematical models. On the other hand, fundamental analysis often creates a "reality gap" between what should be happening and what actually is happening. This gap makes it challenging to make anything other than long-term predictions, which may be correct but difficult to exploit.

In contrast, technical analysis not only bridges this reality gap but also provides traders with a multitude of opportunities to capitalize on.