Technical analysis is a trading discipline that uses statistical trends derived from trading activity, such as price movement and volume, to analyze investments and uncover trading opportunities. In contrast to technical analysis, fundamental analysis focuses on a company’s financials rather than previous price patterns or stock movements.
Technical analysis methods are used to examine how supply and demand for a securities affect price, volume, and implied volatility variations. It is based on the concept that a security’s historical trading activity and price fluctuations can be useful indications of the security’s future price movements when combined with proper investment or trading guidelines.
It is frequently used to produce short-term trading signals from various charting tools, but it may also aid in determining a security’s strength or weakness in relation to the larger market or one of its sectors. This data assists analysts in improving their overall valuation estimate.