What is technical analysis?

What is technical analysis?

Technical analysis is a method of studying stock charts to try and predict where prices might move next. Instead of focusing on a company’s financials or business model, technical analysis looks at patterns in price and trading volume. The idea is that all available information is already reflected in the price, and that trends often repeat themselves.

The most common tool in technical analysis is the candlestick chart. This gives key information vsiaully, in a very quick way. Traders look for shapes, and patterns, such as “Support” (a level where the price keeps bouncing back up) or “Resistance” (a level where the price struggles to go higher).

Technical analysis also uses indicators like moving averages, which smoothout price movements to highlight overall trends. Some traders believe that spotting these signals can help them decide when to buy or sell. For beginners, it’s important to know that technical analysis does not guarantee results. It is a tool used mostly by short term traders rather than long term investors. Still, understanding the basics can help you make sense of the charts you see on platforms and why prices may move based on patterns rather than news.