Basic Assumption

Price Discounts Everything

What exactly does this mean?

In a nut shell, this first assumption seeks to incorporate all the fundamental, political, macro and micro economic data as well as the risk component of a stock into the current market price at any one period.

This infers that the market price can be heavily influenced by an investor’s perception of supply and demand, as well as the general broad economic overview at the time the price is captured.

Therefore, it can be assumed that Technical Analysts believe that the current market price of a stock reflects all the relatively important information that Fundamental Analysts are seeking to provide qualitative and quantitative explanations for.

This is one of the key reasons that Technical Analysts do not focus on the underlying data behind price variation, but rather focus on what the market is valuing the stock at.

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