What Is Technical Analysis?

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What Is Technical Analysis?

Technical analysts use security pricing and trading history to identify the strength and direction of market trends. The familiar charts and graphs we see in the financial news are examples of the tools technical analysis provides for active security traders to predict future trading patterns.

Things To Know

  • Technical analysis is based on the assumption that every aspect of the market is revealed through market movement.
  • Market price is believed to reflect all known information and investor opinions about a security.

Assumption: market movements reveal all

Technical analysts do not use any fundamental company information, such as balance sheets or income statements, to make their predictions. Technical analysis is based on the assumption that every aspect of the market is revealed through market movement. Prices move in trends, and history repeats itself. A trend in motion is more likely to continue than to reverse. This gives the technical analyst the ability to make trades on the basis of predicted market trends.

What technical analysts use

Technical analysts use chart indicators to measure past prices, volume, number of issues traded in a day, and price movement trends. Market price is believed to reflect all known information and investor opinions about a security.