Technical Analysis is an estimate of price movements by analyzing trading volume, supply and demand, short-term or long-term market trends, and other factors that influence it.
Technical analysis is a trading discipline that is used to evaluate and identify investment investment opportunities in trends and price patterns seen in charts. Technical analysts believe that activity and price changes are a safety indicator of future price movements. Technical analysis can be used in any security with historical trade data. This includes stocks , futures, commodities, fixed income , currencies and other securities.
Technical Analysis has 3 main assumptions, namely:
- Market provides Discounts: Many experts criticize technical analysis because it only considers price movements and ignores fundamental factors. Technical analysts believe that everything from corporate fundamentals to broad market factors to market psychology is valued in stocks.
- Prices move with trends: Technical analysts believe that prices move in short, medium and long-term trends.
- History happens repeatedly: Technical analysts believe that history tends to repeat itself. The repetitive nature of price movements is often associated with market psychology, which tends to be very predictable based on emotions such as fear or excitement.
How to use technical analysis
Technical analysis tries to estimate price movements of almost all marketable instruments that are generally subject to the strength of supply and demand, including stocks, bonds , futures and currency pairs. In fact, some people see technical analysis only as a study of the power of supply and demand as reflected in the market price movements of a security. The most common technical analysis applies to price changes, but some analysts track numbers other than prices only, such as trading volume or open interest rates.