What is Technical Analysis?

Technical analysis is one of the two main methods of analyzing markets and selecting investment strategies; The other is fundamental analysis.

Technical analysis analyzes past market performance by looking at the chart activity of price movements, sales volumes, moving averages and statistical data of various results. Fundamental analysis, on the other hand, calculates company value by looking at the company's financial statements.

Technical analysis is like looking at a big picture showing years of market data, while fundamental analysis focuses on individual businesses.

Where have you heard about technical analysis?

By John J Murphy technical Analysis of Financial Markets is one of the most well-known investment reference books. You may have heard of the "chartschool", the proponent of technical analysis, a name derived from the fact that technicists often use charts to interpret the results of their analysis.

What you need to know about technical analysis...

There are two main schools of market analysis that have long been in opposition.

The chart school believes that observing the company's published financial data is not effective because you can learn more from the company's stock price. Critics of technical analysis argue that results are subject to analyst bias and can be interpreted in many different ways.

Technical analysis has only recently gained wide acceptance. Investment banks still rely on fundamental analysis, but often refer to technical analysis for insights.