Technical Analysis
Technical analysis evaluates markets by studying price and volume. Learn what it is, the main indicators, and how it compares with fundamental analysis.
What it is and how to use it
Technical analysis is a trading discipline used to evaluate investments and find trading opportunities by analysing statistical trends from trading activity, such as price movement and volume.
It assumes that past trading activity and price changes can be useful indicators of future price movements when paired with suitable trading rules. It is often used to generate short-term signals from charts. It was first introduced by Charles Dow and Dow Theory in the late 1800s.
Technical analysis indicators
Hundreds of patterns and signals have been developed for technical analysis. Some indicators identify the current trend, including support and resistance areas. Others measure the strength of a trend and how likely it is to continue.
- Price trends and trendlines
- Chart patterns and channels
- Moving averages
- Volume and momentum indicators
- Oscillators
- Support and resistance levels
Technical vs fundamental analysis
Fundamental analysis tries to measure the intrinsic value of an asset, using economic conditions, company financials, earnings and assets. Technical analysis uses only price and volume, on the basis that known fundamentals are already reflected in the price.
Technical analysis is used for stocks, futures, commodities, bonds and currency pairs, and is especially common in commodities and forex, where traders focus on short-term price movements. Many professional analysts combine both approaches.