Technical Analysis is a method of assessing securities by evaluating statistics generated by market activity.
Technical analysts do not attempt to measure a security’s fundamental value, but instead use charts and supplementary tools to identify patterns that can suggest future activity.
Technical analysts refer to the historical performance of stocks and markets are indications of future performance.
THE DIFFERENCE BETWEEN TECHNICAL AND FUNDAMENTAL ANALYSIS?
Technical analysis has a quite different approach to the assessment of buying and selling levels compared to fundamental analysis.
Technical Analysis theory is based on three core principles:
- market action reflects everything;
- prices move in trends;
- history repeats itself.
Fundamental analysis on the other hand, is a method of evaluating a security that entails attempting to measure its value by examining related economic, financial and other qualitative and quantitative factors.
Fundamental analysis uses the study of everything and anything that can affect the security’s value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors. The main difference is that technical analysis looks at the price movement of a security and uses this data to predict its future price movements.
Fundamental analysis, on the other hand, looks at economic factors, known as fundamentals.