What is Technical Analysis

Technical Analysis is the statistical study through which direction of the movement of asset is determined by using historical data.  Immediately a thought comes in our mind that whether these predictions are reliable, but in our daily life there are many things which we predict based on the past data, For example: Whenever doctor sees the report, he is able to predict the disease on the basis of symptoms this is nothing but simply the analysis done.

Technical analysis is a method of evaluating securities that involves a statistical analysis of market activity, such as price and volume.

One major advantage of this analysis is that same type of analysis can be applied in different class of assets. for example –Stock, commodities etc. But fundamental analysis is usually differently done for different kind of assets.

Assumptions of Technical analysis-

There are basic three major assumptions of Technical analysis:

1.    The market discounts everything.

It assumes that stock price reflects every activity of the company, whether it is its financials or some external news. Technical analysis says that if there is some bad news then its price will go down and thus it will reflect in its trend and similarly vice versa.

2.    Price moves in trends

This analysis also assumes that price of a stock follows a trend whether it is upward, downward or flat. And this trend gives indication to the trader whether prices are going to be down or up.

3.    History tends to repeat itself

This is the most important factor. It is assumed that behaviour of the investors is of repetitive nature and investor tends to behave in a same way as they have behaved in the past to a particular situation.

So this was a small introduction to fundamental analysis tool, further we will be discussing in details each tools.