What is Technical Analysis

Technical analysis is a form of security analysis technique, which aims at predicting the future movements of prices via the study of past data. These data are in the form of volume and prices. This technical analysis treats takes into account the actual prices and volume behavior of the concerned instruments or market. Analysts, also called chartists, could use models based on volume-price transformations. This could be any of the following: recognition of patterns, intra-market correlations, inter-market correlations, regressions, moving averages, and the relative index.

Technical analysis and fundamental analysis

Technical analysis disregards the very nature of the market, firm or currency, solely anchored on charts, or the volume-price movements. Fundamental analysis, on the other hand, considersto the actual data of the commodity, currency, market, or the entity involved. It is no surprise that, a very big brokerage or financial firm would employ both a fundamental analysis team and a technical analysis squad.

The technical analysis is popular among financial experts and traders. During the '60s and '70s, however, this technique didn't earn much recognition from mathematicians until modern studies proved that it may result to good outcomes. Within the forex markets, technical analysis is more widely-used than the fundamental kind.

Users of technical analysis use indicators, which aid in the determination of whether or not an asset is trending. Assuming it is so, they would then check the price movement. In the field of futures, the pros look for relationship among volumes, prices, and open interest.