What is the theory behind predictable trend patterns?

Is it because everyone else is using the same limited number of tools and indicators? When I l finished the chapter on fibonnachi numbers in pip school, the first thing that came to mind as to why trends or support/resistance levels might follow fib numbers, is because large groups of people are buying and selling using fib charts. So it stands to reason that it could be reliable. Not because of news or some magic market mojo, but because it’s a popular indicator.

Do the systems people trade with actually or eventually change the market? Say a large pocket of traders trade a certain system or varient of that system. That in turn influences movement, which in turn creates reliability, which then influences a new profitable system, starting the cycle again.

I know there are many influences and much more chaos involved in how the market moves, but it stands to reason popular trading styles could contribute to some predictability, at least from a technical trading standpoint.

Ok, you can laugh at me now…

I don’t believe the market can be influenced as easily as you think. The forex market is the largest financial market with a truly liquid market with average daily trade around 3 trillion dollars (so says wiki).

I am under the impression that it runs similarly as the stock market, so people buy or sell while they think it’s profitable, and once a price reaches a point people get nervous and start unloading. Once it’s down a bit people regain confidence and decide it’s a deal again and buy or sell once again.

I believe fibo and many trading styles capitalize on this fact.

As for indicators and such, many of them take averages of past price movements to predict future. I’m sure most traders make trades off of this fact but again, this is because of past trends not because the indicator is determining a possible trend formation.

Remember, indicators aren’t always reliable so even that should clue you in that there’s more to it than just the same trading philosophy.

The last thing to remember is that personal forex trading make up a small portion of the market, leaving much of it to businesses, banks, ect.

Is there some effect, possibly, but unlikely.

Prices move based on the decisions made by market participants. Those decisions can be heavily influenced by emtions and related thought processes. The patterns of price movement reflect how those emotions and thoughts play out in the trade decision-making process. As such, certain things can definitely be self-fullfilling.