What is technical analysis?

Technical analysis is a method that focuses on the examination of historical market data, particularly price movements and trading volumes, to forecast future price behavior. The underlying principle is that past trading activity and price changes can provide insight into future market movements, as they often reflect the collective behavior of market participants.

Utilizing charts and various technical indicators, practitioners aim to identify trends, support and resistance levels, and other patterns that can inform trading decisions. This approach contrasts with other forms of analysis, which may involve economic indicators or financial statement evaluations, thus highlighting its distinctive emphasis on historical price data as a predictive tool.

By focusing on price patterns and trading volumes rather than intrinsic value or economic factors, technical analysis operates under the assumption that all known information is already reflected in market prices, making it a unique method within the broader field of investment analysis.