Stock Market · Technical Analysis

What technical analysis is (and isn't)

What is Technical Analysis?

Technical analysis (TA) is the study of price and volume data to forecast future price movements. Instead of looking at a company's business, TA asks one question: what is the chart telling us right now?

> "Price is the final truth. Everything else is opinion."

What TA assumes

TA rests on three core beliefs:

1. Market action discounts everything. All known information is already in the price

2. Prices move in trends. They don't jump randomly; there's direction

3. History repeats. Human emotions (greed, fear) create recurring patterns

What TA is NOT

• It doesn't tell you why a stock will move, only that it probably will
• It is not a crystal ball. Patterns have probabilities, not certainties
• It won't replace business sense. The best traders combine TA with a market view

Fundamental vs Technical

A fundamental analyst asks: is this company undervalued? A technical analyst asks: is this stock's chart showing a good entry right now? Both can be right. Many professionals use both.

70%of short-term price moves are driven by sentiment, not fundamentals

When TA works best

TA is most useful for timing. Knowing WHEN to enter and exit, not necessarily WHAT to buy. It works well in liquid markets where many participants react to similar signals.

If you're a long-term investor, you might use TA only to get a better entry price on a stock you already decided to buy based on fundamentals.

Takeaway. TA reads price and volume to forecast moves. It's about timing and probability, not certainty.