Technical analysis is the technique used by traders to evaluate investments with the study and use of price and volume charts and other technical indicators. Unlike fundamental analysis which focuses on the financial health of the company technical analysis focus on price movements, trading signals and other tools to evaluate the stock’s strength or weakness.
How does technical analysis work?
Technical analysis interprets and forecasts the price movement of shares which are affected by supply and demand forces. Technical analysis visually tracks the activity of the stocks with the help of various charts and indicators to find price areas of strong interest both in terms of buying and selling. History tends to repeat itself as evidenced by price patterns is one of the basic assumptions of technical analysis.
In general, technical analysts look at the following broad types of indicators: