Technical Analysis

Technical Analysis is the analysis of the movement of prices, volumes and open interests – using historical data – based on the study of past behavior of currency, indices and commodities markets.

Technical analysis is a technique used to forecast the future direction of prices through the study of historical market data, primarily price, volume and open interest.

Technical traders use trading information (such as previous prices and trading volume) along with mathematical indicators to make their trading decisions. This information is usually displayed on a graphical chart updated in real time that is interpreted in order to determine when to buy and when to sell a specific instrument.

• Advantages of Technical Analysis
  It requires much less data than fundamental analysis. From price and volume, a technical trader can obtain all the information he needed.
  As it is focused on identifying trend reversal, the question of timing to enter a trade is easier to address with technical analysis.

• Drawbacks of Technical Analysis
  Technical analysis can become a self fulfilling prophecy. When many investors, using similar tools and following the same concepts, shift together the supply and demand, this can lead to the prices moving in the predicted direction.