InvestorQ : Can you throw some light on what exactly is technical analysis?
Abhi Yadav made post

Can you throw some light on what exactly is technical analysis?

Abhisha Yadav answered.
2 years ago

Technical analysis is a tool, or method, used to predict the probable future price movement of a security – such as a stock or currency pair – based on market data. It is actually a very wide term. It can be applied to stocks, indices, commodities, currencies etc. In fact, any asset that shows discernible price patterns can apply technical analysis. As long as the trend can be plotted in a chart, you can do technical analysis. That is why technical analysts are also popularly referred to as chartists.

Technical analysis is based on the premise that that market reflects all the available information and also everything that is necessary to know. Technicals also believe that stock prices are just an outcome of underlying trends which are created by demand and supply, which are in turn created by human psychology. The theory behind the validity of technical analysis is the notion that the collective actions – buying and selling – of all the participants in the market accurately reflect all relevant information pertaining to a traded security, and therefore, continually assign a fair market value to the security. Basically technical analysis believes that the wisdom of the collective investors and traders is reflected in the market and the median intelligence is always better than what most traders can bring to the table.