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What is technical analysis?

Alexander Richards


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Hi, thank you for asking! 

Technical analysis works by trying to detect market patterns, instead of trying to analyze security’s fundamental attributes. Professional analysts typically accept three general assumptions for the discipline:

The market discounts everything - Analysts believe that every asset and part of a single company is included in the price and affects it. This is called market psychology. The only thing remaining is the analysis of price movements, which technical analysts view as the product of supply and demand for a particular stock in the market.
Price moves in trends - Experts expect from prices to change without regard to the time frame observed, no matter how big or small the market is. Using this change, they can expect the future price movements of an asset, without any erratic movements. Most of the trading strategies are based on this assumption.
 History tends to repeat itself - Without exception, market movements are cyclic, meaning that they will surely repeat themselves, in some specific time. Technical analysis is used to predict when exactly will these price changes take place according to the historical data.

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