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Technical analysis is a method for evaluating and forecasting price movements of financial assets by analyzing historical price and volume data. It differs from fundamental analysis, which focuses on intrinsic value and underlying factors affecting an asset's worth. Technical analysis is primarily used for short-term trading, relying heavily on charts and patterns rather than financial statements.

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26 views10 pages

Chapter - 1

Technical analysis is a method for evaluating and forecasting price movements of financial assets by analyzing historical price and volume data. It differs from fundamental analysis, which focuses on intrinsic value and underlying factors affecting an asset's worth. Technical analysis is primarily used for short-term trading, relying heavily on charts and patterns rather than financial statements.

Uploaded by

komalbrar0281
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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THE ART AND SCIENCE OF

TECHNICAL ANALYSIS
Empowering minds and mastering markets

Komal Brar
CHAPTER - 1

TECHNICAL ANALYSIS
INTRODUCTION TO TECHNICAL ANALYSIS
What is technical analysis ?

Technical analysis is a method used to evaluate and forecast the price movements
of financial assets, such as stocks, currencies, commodities, and cryptocurrency,
by analyzing historical price and volume data. It is one of the two primary methods
used for analyzing financial markets, with the other being fundamental analysis.

Technical analysis is trading discipline employed to evaluate investment and


identify trading opportunities in price trends and patterns seen on charts.

The fundamental premise of technical analysis is historical price data contains


valuable information about market behavior and patterns or trends in past price
movements can repeat in the future. Therefore, by studying these historical
patterns and applying various tools and techniques, analysts attempt to make
informed predictions about the future price direction of an asset.
FUNDAMENTAL VS TECHNICAL
Fundamental analysis and technical analysis are two distinct methods used by
investors and traders to evaluate financial assets and make investments decisions.
Each approach focuses on different aspects of an asset and has its unique set of
tools and methodologies. Let’s explore the key differences between fundamental
and technical analysis.
FOCUS

FUNDAMENTAL ANALYSIS: This approach focuses on analyzing the intrinsic value of


an asset by examining the underlying factors that affect its value fundamental
analysts study a company’s financial statements, earning, growth prospects,
industry trends, competitive position, management qualit, and overall economic
conditions.

TECHNICAL ANALYSIS: This approach focuses on studying past market data,


primarily price and volume, to identify patterns, trends, and signals that may help
predict future price movements. Technical analysts are not concerned with the
underlying fundamentals of the asset but instead analyze historical price behavior
FACTORS CONSIDERED

FUNDAMENTAL ANALYSIS: Factors considered in fundamental analysis include


earnings, revenue, profit margins, cash flow, dividends, macroeconomic indicators,
interest rates, interest rates, industry dynamics, and competitive advantages

TECHNICAL ANALYSIS: Technical analysis focuses on price patterns, trends, support


and resistance levels, trading volumes, and various technical indicators and
oscillations
TIMEFRAME

FUNDAMENTAL ANALYSIS: Fundamental analysis is often associated with long-term


investment strategies as the evaluation of company’s fundamentals takes time to
assess its long-term potential and growth prospects.

TECHNICAL ANALYSIS: Technical analysis is often used for short-term to medium-


term trading and investment decisions. Traders typically analyse price patterns
over shorter
USE OF CHARTS

FUNDAMENTAL ANALYSIS: Fundamental analysis typically does not rely on charts


on historical price data. Instead, it involves studying financial statements and
economic indicators

TECHNICAL ANALYSIS: Technical analysis heavily relies on price charts, candlestick


patterns, and other visual representation of historical price data to identify trends
and patterns
MARKET PARTICIPANTS

FUNDAMENTAL ANALYSIS: Fundamental analysis is more commonly associated with


value investors who seek to identify undervalued assets based on their intrinsic
worth

TECHNICAL ANALYSIS: Technical analysis is often used by traders who aim to


capitalize on short-term price movements and identify entry and exit points for
trade
INTERPRETATION

FUNDAMENTAL ANALYSIS: Fundamental analysis involves a qualitative and


quantitative assessment of a company’s financial health and overall economic
environment. The interpretation may be more subjective and may vary among
analysts

TECHNICAL ANALYSIS: Technical analysis relies on mathematical calculations and


chart patterns that are more objective and standardized

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