- Technical Analysis is the art and science of forecasting future prices based on an examination of the past price movements.
- Method of evaluating securities by analysing the statistics generated by market activity, such as past prices and volume.
- Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
- Search for identifiable and recurring stock price patterns.
- Believes that share prices are determined by the demand and supply forces operating in the market.
- Concentrate on the movement of share prices – examining past share price movements, future share prices can be accurately predicted.
- Prices move in trends or waves which may be upward or downward.
- A rational behind is that – share price behaviour repeat itself over time and analys attempt to drive methods to predict this repetition.
- The time frame in which technical analysis is applied may range from – 1 min, 5 min, 10 min, 15 min, 30 min, 1 hour etc, daily, weekly etc.
The basic and necessary assumptions regarding technical analysis
- The price discounts everything – each price represents a momentary consensus of value of all market participants – large commercial interests, speculators, fundamental researchers, technicians, gamblers at the moment of transaction.
- Price moves in trends
- History tends to repeat itself.
- What is more important than why
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April 14, 2022