Financial markets are affected by multiple reasons. The most logical reasons are news. Good news might raise the value of a company and its stocks, and the same goes for the opposite scenario. However, prices change every second, and there aren’t news events for every second.
For instance, support and resistance (SR) is a well-known concept. If I trade with SR, I support the concept, and if many people trade SR, many people support SR. In other words, the price of the stock XY has risen multiple times to $100 and bounced every time. Now it’s approaching the $100 mark again.
Without any price action knowledge, I would see this and think: “There were many market participants (or a few with the majority of the traded shares) who believed, for some reason, that prices wouldn’t go higher, and they were right every time.”
Market participants who observe this pattern may act accordingly. They will, under the right general conditions, exit their long positions and enter short positions. In the right dimensions, their behavior can affect the price, creating a self-fulfilling prophecy.
So, one of the main goals is to see what most of the market participants see.