What are the 4 basics of technical analysis?
How many types of technical analysis are there?
Reactive technical analysis is practiced when trader’s entries and exits are based on current price signals that backtest as profitable by creating good risk/reward ratios. Their quantified price signals tell them when to get in for a good probability of success and where to get out with a small loss or to lock in a profit. Reactive traders rely on trade management as the price action plays out to minimize losses and maximize gains for profitability. They rely on quantified systems to make money in the markets, not knowing the future.
The best use of both types of technical analysis is to create good risk/reward ratios on entry. You know where you will be getting out if the trade doesn’t work out and the potential magnitude of the win if you are right. This is the true value of technical analysis.