Technical Analysis

Search Dictionary

Definition of 'Technical Analysis'

Technical analysis is a method of analyzing financial markets and securities by examining historical market data, primarily price and volume data, to identify patterns and trends. Technical analysts believe that historical price and volume data can provide valuable information about future price movements and use this information to make investment decisions.

The tools and techniques used in technical analysis can vary, but some of the most common methods include chart patterns, moving averages, and technical indicators. Chart patterns are graphical representations of historical price data that can help identify trends, support and resistance levels, and other key price levels. Moving averages are calculated by averaging the prices of a security over a specific period of time and can help smooth out price fluctuations to identify trends. Technical indicators are mathematical calculations based on price and/or volume data that can provide additional insights into market trends and momentum.

Technical analysis is often used in conjunction with fundamental analysis, which examines a company's financial and economic factors to determine its value. Technical analysis can be particularly useful for short-term traders who are interested in identifying short-term price movements, but it is also used by longer-term investors to help identify trends and market movements.

Critics of technical analysis argue that it relies too heavily on past price data and does not account for fundamental factors, such as economic data or changes in a company's management, that can impact a security's value. However, supporters of technical analysis argue that historical price data can provide valuable insights into market trends and momentum, and can be a useful tool for making investment decisions.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.