Professional Documents
Culture Documents
Technical analysis
Technical analysis is a financial term used to denote a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.
The correct definition of technical analysis is "the skill of being able to predict a particular security in the financial market". This type of analysis revolves around the actual movement of the market; this is not the case with fundamental analysis. Factors related to politics or economics are pushed aside, though they do have an impact on a market's movement. It searches for patterns or trends that can recur in the future. When this knowledge becomes available, prediction of what will happen in the future becomes easy.
Despite this analysis being quite reliable, it is advisable to go in for fundamental analysis also. A comparison between the results of both will give a double edge to accuracy.
Characteristics
Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions. Technical analysis is widely used among traders and financial professionals and is very often used by active day traders, market makers and pit traders. Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis analyzes price, volume and other market information, whereas fundamental analysis looks at the facts of the company, market, currency or commodity.