Patterns

In general, patterns on a chart “work” for exactly the same reason religious or sacred symbols exist - because other people think so. Other people caused them to appear, no more, no less.

The patterns are socially constructed, the same way religious symbols and rituals are. In the same way they are self-reinforcing.

Single-candle patterns, along with the color of the candle (which indicates direction of the price move) are the most “objective” (given that every candle can be decomposed further into candles of smaller time interval).

Most fundamentally, a reversal can be captured in a single-candle pattern, along with its “strength” or “momentum”.

When other people see an already formed candle with a “wick” they see a “strong reversal”, which they interpret according to their current set of beliefs abot the market.

A system which react in a timely manner to just a single one-candle pattern could in principle consistently beat any “random walk”.

So called TA or Technical Analysis is a teaching (similar to sectarian ones), according to which certain patterns on a chart predict certain outcomes within the Market.

The more people are familiar with TA, the more their prophesies are self-fulfilling. Just like religious rites, everything reinforces itself with actions of the practitioners.

Market movements and price actions are not random. There is no such thing as randomness (which is an abstract mathematical concept) in the first place. All the price actions are results of actions of all participating agents, who have certain beliefs and assumptions (in their heads or programmed into trading bots).

The future is not predictable in principle (and predictions are mostly wrong), however, reacting to certain events or patterns with (or against) other market participants makes actions meaningful or even profitable.

This is what TA is.

This is a less wrong view of Reality. Other people are looking for well-known patterns, so they eventually emerge from chaos as results of amplified and self-reinforced actions of the crowds of market participants - idiots are FOMOing in, etc.

There is literally nothing else in it - just large crowds of emotional people acting out of sync.