Before you read below we want to make sure you do not get overwhelmed with everything discussed.  There is certainly a learning curved involved while you learn about all the aspects of technical analysis.  The good news is that you only have to become proficient using a select few of the indicators that are available to you.  Once you decide what makes sense to you and what works for you things become much easier.

Technical Analysis is the forecasting of future price movements based on an examination of past price movements. Technical analysis does not result in absolute predictions about the future but can help investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety of charts and indicators that show price over time.

Technical analysts seek to identify price patterns and trends and attempt to exploit those patterns. Technical analysts use various methods and tools but the study of price charts is primary.

Those who use technical analysis search for price patterns and they use indicators such as moving averages to find support and resistance. Technical analysts also use indicators, which are typically mathematical transformations of price or volume. These indicators are used to help determine whether a stock is trending, and if it is, its price direction. Technicians also look for relationships between price and volume. Examples include Stochastics and MACD.

There are several schools of technical analysis. Those in different schools (for example, candlestick charting or Elliot Wave Theory) may ignore the other approaches, yet many traders combine elements from more than one school. Some technical analysts use subjective judgment to decide which pattern a particular instrument reflects at a given time, and what the interpretation of that pattern should be. Some technical analysts also employ a strictly mechanical or systematic approach to pattern identification and interpretation.

Technical analysis is frequently contrasted with fundamental analysis, the study of economic factors that influence prices in financial markets. Technical analysis holds that prices already reflect all such influences before investors are aware of them, hence the study of price action alone. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.

Technical analysis works mainly because most traders who use charts to determine entry and exit points are looking for the same thing, therefore when a price, for example, hits a support level and holds and then goes back up this is because all of the chart traders noticed that support held and it is time to buy.

Our learning center will help you understand all types of technical analysis and how to put it to use for your advantage.