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Understanding Technical Analysis

Underlying Assumptions of Technical Analysis

Fundamental Analysis

Limitations

What Assumptions Do Technical Analysts Make?

What's the Difference Between Fundamental and Technical Analysis?

How Is Technical Analysis Used?

What Is Technical Analysis?

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

KEY TAKEAWAYS

Technical analysis is a trading disciplineemployed to evaluate investments and identify trading opportunities in price trends and patterns seen on charts.

Technical analysts believe past trading activity and price changes of a security can be valuable indicators of the security's future price movements.

Technical analysis may be contrasted with fundamental analysis, which focuses on a company's financials rather than historical price patterns or stock trends.



Understanding Fundamental Vs. Technical Analysis

Understanding Technical Analysis

Unlike fundamental analysis, which attempts to evaluate a security's value based on business results such as sales and earnings, technical analysis focuses on the study of price and volume. Technical analysis tools are used to scrutinize the ways supply and demand for a security will affect changes in price, volume, and implied volatility. Technical analysis is often used to generate short-term trading signals from various charting tools, but can also help improve the evaluation of a security's strength or weakness relative to the broader market or one of its sectors. This information helps analysts improve their overall valuation estimate.

Technical analysis can be used on any security with historical.

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