What is Technical Analysis?
Technical analysis is the study of historical market data, including price and volume. Using both behavioral economics and quantitative analysis, technical analysts aim to use past performance to predict future market behavior. The two most common forms of technical analysis are chart patterns and technical (statistical) indicators.
What Does Technical Analysis Tell You?
Technical analysis is a blanket term for a variety of strategies that depend on the interpretation of price action in a stock. Most technical analysis is focused on determining whether or not a current trend will continue and, if not when it will reverse. Some technical analysts swear by trendlines, others use candlestick formations, and yet others prefer bands and boxes created through a mathematical visualization. Most technical analysts use some combination of tools to recognize potential entry and exit points for trades. A chart formation may indicate an entry point for a short seller, for example, but the trader will look at moving averages for different time periods to confirm that a breakdown is likely.