Technical analysis Basic principles

What is technical analysis?

Technical analysis is the study of prices and volume to predict future stock prices or financial price movements. Technical analysis does not lead to absolute forecasts for the future. Instead, technical analysis can help investors predict what is “likely” to happen to prices over time.

Technical analysis is not an exact science. This is an art and requires considerable experience. Not all surveys work the same for every traded instrument. One study may give excellent buy and sell signals, while another may not work for you at all.

Technical analysis of the stock market Basic principles

Technical analysis is based on these three basic principles:

Price discounts Everything

Prices are moving in trends

History repeats itself

# 1- Price discounts Everything

Technical analysts believe that the current price fully reflects all the information. As all information is already reflected in the price, it represents the fair value and should be the basis for analysis. After all, the market price reflects the general knowledge of all participants, including traders, and …

Technical analysis of the stock market uses the information gathered from the price to interpret what the market says in order to form a view of the future.

# 2- Prices are moving in trends

Technical analysts or graphs believe that profits can be made by following trends. In other words, if the price has risen, they expect it to continue to rise; if the price has fallen, they expect it to continue to fall. However, most technicians also acknowledge that there are times when prices do not move.

# 3- History repeats itself

Technical analysts believe that investors are repeating their behavior and suggest that there is useful information hidden in the price history; that it is a way of analyzing the past actions of people in a particular market, reflected by their actual transactions.