Technical analysis

Family VI · Charts & indicators

Not to be confused with fundamental analysis, forex technical analysis indicators.

Technical analysis is a school of market analysis that examines past price action and trading volume to identify patterns and levels that may repeat. It treats the chart as a record of collective participant behaviour and uses that record to frame potential entries, exits and risk points. It is applied across equities, futures, currencies and other liquid markets.

Core tools and assumptions

Technical analysis rests on the idea that price discounts available information, that prices trend, and that history tends to rhyme. Practitioners use chart types such as candlesticks and bar charts, together with indicators like moving averages, relative strength index and Bollinger bands. Support and resistance levels, trendlines and chart patterns are also common.

• Trend analysis: identifying direction and strength.
• Momentum: measuring the speed of price change.
• Volume: gauging participation behind a move.

Worked example

A trader applies a simple moving-average crossover to a stock. The 50-day average crosses above the 200-day average, often called a golden cross. The trader uses the crossover as a signal and sets a stop below a recent swing low.

Limitations

Technical analysis is subjective: different practitioners may read the same chart differently. Indicators are derived from price and can lag or produce false signals in ranging markets. It does not consider a company's earnings, balance sheet or macroeconomic conditions, so it is often used alongside other forms of analysis. Rules on leverage, short selling and available instruments vary by broker and jurisdiction.

Often confused with

fundamental analysis

Fundamental analysis evaluates a company's financial statements, industry position and economic environment to estimate intrinsic value, whereas technical analysis studies price charts and volume alone; the visible sign is whether the work begins with earnings, cash flow and balance-sheet data or with a price chart.

forex technical analysis indicators

Forex technical analysis indicators are specific chart tools such as moving averages or RSI applied to currency pairs, while technical analysis is the broader discipline that includes those tools and the chart-reading framework around them; the visible sign is whether the discussion is limited to indicator settings on a currency pair or covers the general method of reading any market's price history.

See also

• forex technical analysis indicators
• price action
• fundamental analysis
• support and resistance
• fibonacci
• candlestick