Technical analysis and fundamental analysis are the two broad methods used to make investment decisions. Technical analysis is a security analysis methodology for forecasting the direction of prices by means of the study of past market data, primarily price and volume.
Technical analysts (or technicians, or chartists) do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
There are many types of technical traders. Some rely on chart patterns, others use technical indicators and oscillators, and most use some combination of the two.
What separates technicians from their fundamental counterparts is technical analysts' exclusive use of historical price and volume data.
The field of technical analysis is generally based on the following assumptions:
- The market discounts everything.
- Price moves in trends.
- History tends to repeat itself.