Technical analysis is a trading methodology for evaluating securities by analyzing statistics generated by market activity, such as past prices and volumes. Traders use charts and various indicators to identify patterns and predict future price movements, believing history tends to repeat itself.
Technical Analysis
Definition
Technical analysis is a trading methodology for evaluating securities by analyzing statistics generated by market activity, such as past prices and volumes. Traders use charts and various indicators to identify patterns and predict future price movements, believing history tends to repeat itself.
Example
A technical analyst might look for a 'head and shoulders' pattern on a stock chart, believing it signals a potential trend reversal and a good selling opportunity.
Key Points
- 1Studies historical price and volume data.
- 2Assumes past price behavior predicts future movements.
- 3Uses charts, indicators, and patterns.
- 4Often contrasted with fundamental analysis.
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