Technical Analysis
Technical analysis is a method of evaluating securities by studying past price and volume data, charts and indicators to identify trends and potential trading signals.
Technical analysts, often called chartists, focus on how a stock has traded rather than on the business itself. They assume that price reflects available information, that prices tend to move in trends, and that patterns in crowd behavior can repeat.
Common tools include trend lines, support and resistance levels, candlestick patterns, moving averages and indicators such as RSI, MACD and Bollinger Bands. Volume is used to confirm whether a move has broad participation.
Technical analysis is widely used for timing entries and exits, setting stop levels and managing risk, especially by short-term traders. Many investors combine it with fundamental analysis, which looks at earnings, valuation and financial health.
Its predictive power is debated. Academic studies have produced mixed results, and the efficient market hypothesis suggests that consistent profits from price patterns alone should be hard to achieve after costs. Example: a trader might buy when a stock's price crosses above its 50-day moving average, treating it as a sign of an emerging uptrend.