Technical analysis (TA) encompasses a variety of tools and methods aimed at achieving profitable trading outcomes in the market. Contrasting with fundamental analysis (FA), which delves into a company's economic and financial circumstances, technical analysis evaluates the historical progression of a security's price. This evaluation uses patterns and instruments grounded in previous market data.
For technical analysis to be effective, certain presumptions must be made:
- Historical prices can be utilized to predict a security's future price movements (thereby challenging the random walk hypothesis).
- Prices operate in discernible trends, with present trends being shaped by their predecessors.
Subsequent sections will introduce diverse tools and strategies frequently employed by experts in technical analysis.