Definition of Technical Analysis

What is Technical Analysis

Technical analysis is the study of historic stock prices and volume to identify and project price trends. The forecasted price movements are based on a security’s past patterns of price change, rates of change and changes in volume of trading and open interest.

These price trends are then used to determine potential entry and exit points for trades. Technical analysis is a type of financial analysis performed with stock charts and specific tools for analysis, such as moving averages or Bollinger bands.

Technical analysis is based upon the premises that market action discounts everything, prices move in trends and history repeats itself. The charts created in technical analysis reflect the bullish or bearish psychology of the market.

An individual that uses technical analysis to forecast stock prices is a technical analyst. They believe that market movements are predictable.

Glossary of Terms and Phrases

A financial dictionary or glossary is an essential tool to better understand the meaning of a specialized term or phrase. It would obviously make life much easier if everyone spoke the same language and used the same financial terms and phrases but that is not realistic.

We learn new languages to communicate with each other, transact business globally and to appreciate other cultures. Global finance is a specialized language that if understood and mastered, it will provide benefits that help to decrease risk and improve investment returns. Financial literacy is the foundation of developing good investment strategies and sound decision making.

Related Investment Terms

Bollinger Bands

Fundamental Analysis

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