What is Technical Analysis
Technical analysis is a technique used to forecast the future direction of prices through the study of historical market data, primarily price, volume and open interest.
Technical traders use trading information (such as previous prices and trading volume) along with mathematical indicators to make their trading decisions. This information is usually displayed on a graphical chart updated in real time that is interpreted in order to determine when to buy and when to sell a specific instrument.
The basis of modern technical analysis is made up of the following:
The price is a comprehensive reflection of all market forces. At any given time, all market information and forces are reflected in the prices.
Prices move in trends that can be identified and turned into profit opportunities.
Price movements are historically repetitive.
Almost every trader uses some form of technical analysis. Even fundamental analysis traders are likely to glance at price charts before executing a trade, as these charts help traders determine ideal entry and exit points for a trade. They provide a visual representation of the historical price action of whatever is being studied. As it is focused on identifying trend reversal, the question of timing to enter a trade is easier to address with technical analysis.