What is Technical analysis in Trading ?

Technical analysis.

Technical analysis in trading is a method of evaluating financial assets—like stocks, forex, or crypto—by analyzing price charts, patterns, and market indicators, rather than focusing on the company’s fundamentals (like revenue or earnings).

🔍 Key Idea:

Technical analysis is based on the belief that:

“All known information is already reflected in the price, and price moves in trends that repeat over time.”

So, by studying past price movements and volume, traders try to predict future price behavior.

🧰 Core Tools of Technical Analysis:

  1. Price Charts

    • Line chart

    • Candlestick chart (most popular)

    • Bar chart

  2. Trend Analysis

    • Uptrend, downtrend, sideways

    • Support and resistance levels

  3. Chart Patterns

    • Head and shoulders

    • Double top/bottom

    • Triangles, flags, and wedges

  4. Technical Indicators

    • Moving averages (MA)

    • Relative Strength Index (RSI)

    • MACD (Moving Average Convergence Divergence)

    • Bollinger Bands

    • Volume indicators

  5. Candlestick Patterns

    • Doji, hammer, engulfing, etc.

✅ Why Traders Use It:

  • To time entries and exits

  • To find trading opportunities

  • To manage risk

  • To identify market sentiment

⚠️ Limitations:

  • It's not foolproof—markets can be unpredictable.

  • Works better in liquid and actively traded markets.

  • Often used together with risk management and sometimes fundamental analysis.

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