Technical Analysis

Technical Analysis is the study of market action through the use of charts for the purpose of forecasting future price trends.

There are three rationales on which the technical approach is based:

  • Market actions discount everything

    • A technician believes that anything that can possibly affect the price - fundamentally, politically, psychologically or otherwise - is reflected in the market place. Hence if everything that affects market price is ultimately reflected in market price, then the study of that market price is all that is necessary.

  • Prices move in trends

    • Technicians accept the fact that markets trend. The purpose of charting the price action of a market is to identify trends in early stages of their development for the purpose of trading in the direction of those trends.

  • History repeats itself

    • The key to understanding the future lies in the study of the past. Technicians believe that the emotions in the market exist because investors' behaviour repeats itself. Recognizable and predictable price patterns will develop on chart due to human psychology.

To learn the various technical indicators, please click here.

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