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Technical Analysis

Technical analysis is a method used to evaluate and forecast the future price movements of financial assets by analyzing historical price charts, trading volume, and other market data. Traders and investors use technical indicators, patterns, and statistical tools to identify trends, momentum, support and resistance levels, and potential entry and exit points. Unlike fundamental analysis, which focuses on a company's intrinsic value, technical analysis relies solely on price and volume data.

Example

A trader uses technical analysis by analyzing moving averages and the relative strength index (RSI) to predict whether a stock’s price is likely to rise or fall in the short term.

Key points

• A method of predicting future price movements based on historical data.

• Uses charts, volume, and technical indicators like moving averages and RSI.

• Focuses on trends, momentum, and market psychology rather than fundamentals.

Quick Answers to Curious Questions

Technical analysis relies on historical price and volume data, while fundamental analysis evaluates a company's intrinsic value through financial statements and economic conditions.

They use indicators like moving averages, relative strength index (RSI), and chart patterns to predict trends and market movements.

It helps identify trends, support and resistance levels, and momentum shifts, guiding traders on when to enter or exit a trade.