What does the principle of Summation describe about price movement?

The principle of Summation describes price movement as a composite wave formed by all amplitudes summed together. This concept is rooted in the idea that price movements are not isolated events but rather a cumulative effect of various forces acting on the market, including different time frames and price levels. By viewing price as a composite wave, technicians can analyze how multiple trends and patterns interact, offering greater insights into potential future price movements.

This perspective allows traders and analysts to identify underlying strengths and weaknesses in price action, as well as to understand the overall market sentiment. The summation of different amplitude movements provides a holistic view, making it easier to track and forecast price trends based on historical data and patterns. Understanding this principle is essential for using technical analysis effectively, as it integrates various market signals into a coherent interpretation of price behavior.