Technical analysis is a method of evaluating securities by analysing statistics generated by market activity, such as past prices and volume. It is based on the idea that market trends, as shown by charts and other technical indicators, can predict future activity. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
Technical analysis is often used in conjunction with fundamental analysis, which looks at a company’s financial health and industry position, to make investment decisions. While technical analysis can be used on its own, it is often used in combination with fundamental analysis and other tools to provide a well-rounded investment strategy.
There are many different technical indicators and chart patterns that analysts can use to try to predict future price movements. Some common technical indicators include moving averages, relative strength index (RSI), and Bollinger bands. Chart patterns, such as head and shoulders and triangles, can also provide clues about a security’s likely future price movements.
It’s important to note that technical analysis is not an exact science, and there is no guarantee that any particular analysis or indicator will be successful in predicting future price movements. Technical analysis should be used as one tool in an overall investment strategy, rather than the sole basis for making investment decisions.
