According to technical analysis, what are the emotions of traders expected to influence?

The correct answer is that emotions of traders are expected to influence investor behavior and price performance. In technical analysis, it is understood that market prices reflect not only the fundamental value of an asset but also the collective psychology of traders and investors. Emotions such as fear, greed, and anxiety play significant roles in decision-making processes. These emotions can lead to patterns in trading behavior that are observable in price movements.

For instance, during times of market euphoria, traders may buy aggressively, pushing prices higher, while during periods of fear or uncertainty, they may sell off their assets, causing prices to fall. These emotional responses, rather than purely rational assessments of value, can create trends and price patterns that technical analysts aim to study and predict.

While company fundamentals and regulatory policies are important aspects of market analysis, they do not directly reflect the emotional state of traders. Additionally, the efficiency of the market refers to how well prices reflect available information and does not specifically encompass emotional influences on trading behavior. Therefore, focusing on the implications of emotions on investor behavior and price performance aligns directly with the core principles of technical analysis.