Technical analysis (TA) regroups a set of tools and methodologies in order to trade profitably in the market. Unlike fundamental analysis (FA) which studies the economic and financial factors related to a company, technical analysis studies the historical evolution of the price of a security, working with patterns and tools that rely on past market data.
In order for technical analysis to work, we must make the following assumptions:
The evolution of the price of a security can be forecasted using past prices (as such technical analysis does not support the random walk hypothesis).
Prices move in trends, where current trends can be influenced by past trends.
The following pages contain various tools and methodologies commonly used by technical analysts.