Business, Legal & Accounting Glossary
In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.
Technical Analysis is a method of forecasting prices of stocks, bonds, futures contracts, indices, or other financial instruments. The goal of technical analysis is to predict the future price level or direction. It tends not to be the goal of technical analysis to explain why prices behave as they do; that would be fundamental analysis. Technical analysis primarily studies the action of a financial market.
The working principle behind technical analysis is that any influence on the market is already reflected in current price levels. Followers of technical analysis believe that: 1) prices move in trends, 2) history repeats itself, and 3) the market discounts everything. Technical analysis involves the use of different kinds of charts, or other market indicators such as moving averages, volume and open interest, oscillators, Japanese candlesticks, Elliott Wave Theory, and cycle analysis.
There are many techniques in technical analysis. Adherents of different techniques (for example, candlestick charting, Dow Theory, and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique.
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This glossary post was last updated: 22nd March, 2020