Technical analysis is a method of analyzing the prices of financial assets (such as stocks, currencies, and commodities) that relies on studying historical price movements and charts to predict future price movements. This analysis is based on the assumption that all available information about a financial asset is already embedded in its price, and that asset prices follow patterns that can be identified and analyzed.
There are several tools and indicators that technical analysts use in their analysis, including:
1. Charts: such as Japanese candlesticks, trend lines, and technical patterns such as head and shoulders and channels.
2. Technical indicators: such as the Relative Strength Index (RSI), the MACD, moving averages, etc.
3. Volume: Used to measure the strength of trends and prices.
4. Support and resistance: Price levels at which a reversal in price movement is expected.
Technical analysis is based on the idea that “history repeats itself,” and that recurring trends and patterns can provide signals about future price movement.
