A technical analysis is an investigation into the performance of securities and stocks depending on historical trends, market influences and probability. It differs from fundamental analysis in that technical analysis disregards the intrinsic value of the security or stock. A technical analyst will not value a product for its own merit, but will analyze the historical performance of the product, the probability of its reception and then form an informed opinion about it.
The primary area of focus of technical analyses is the price of securities, which are forecasted based on market data of the past, especially price and volume.
This means that a technical analyst can determine the performance of a client’s securities without examining the intrinsic value of the security itself, but by analyzing its past performance.
This technique is based on the premise that investors repeat behavioral patterns. For example, technical analysts base their predictions on the hypothesis that current investors will repeat the buying patterns of previous investors, and thus, the performance of the securities will also mirror that of previous securities.
Technical analysis is most commonly used in foreign stock markets, in pit trading, market making and by day traders. Though criticized earlier, technical analysis has now been accepted as having positive results.
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