Technical analysis

Technical analysis is the use of statistics generated by market activity,
such as price and volume, to predict future trends in that market. Technical
analysis does not try analyize the financial data of a company such as
cashflow, dividends and projection of future dividends. That type of
analysis is called fundamental analysis.

Technical analysis is based on a variation of the efficient market
hypothesis, which states that all participants in the stock market have
equal and instantaneous access to all the information about stocks.
Therefore, there is no need to analyze this information, since many other
market participants are already doing so, and therefore this information is
reflected in the price of the stock. Instead, adherents to this school
merely analyze the graphs of the stock price history, trying to see patterns
with past events.

The point of view of most traders who use technical analysis is that it is a
way of analyzing the past actions of people in a particular market as
reflected by their actual transaction history. Until people agree on price
but disagree on value, no transaction takes place. They believe that prior
actions are useful as a guide to future actions. In particular that
transaction data provides information about supply and demand at various
price levels.

While technical analysis is widely used (if only as one input among many) by
both professional and amateur traders as a means of predicting future market
moves, it is generally not used by economists in any academic sense.

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