What is technical analysis

What is technical analysis

Technical analysis is a method for analyzing tradable assets in order to predict future price movements. Technical analysis attempts to interpret market psychology by analysing the balance between supply and demand, i.e. the balance between buyers and sellers. Technical analysis is only interested in supply and demand, and only uses historical price and volume movements.

Technical analysis therefore only uses various price charts and indicators in order to analyse supply and demand. Technical analysis uses the same principles and analysis tools for all financial markets.

Price is a continuous struggle between buyers and sellers. When there is a surplus of buyers, i.e. rising demand, the price rises. When there is a surplus of sellers, i.e. rising supply, the price falls.

Technical analysis is about being on the right side of the market. If demand will rise, you want to buy early. If supply will rise, you want to sell early.

Why does technical analysis work?

The foundation of technical analysis is the fact that price movements are not entirely random. Had they been, it would not have been possible to predict any price movements.

Price movements make patterns, i.e. trends and formations, that can be identified. And these patterns repeat themselves. Technical analysis attempts to identify trends and price formations in order to use the patterns for e.g. stock trading.
Identifying a rising trend allows you to find good buying opportunities when rising prices are expected in the future. And similarly to find good sales opportunities when falling prices are expected in the future.

Price movement patterns repeat themselves because investors’ psychological mechanisms do not change. Therefore a price formation, for example, indicates a specific price movement.

Fear of losses and greed for profit have always influenced people in various markets. Technical analysis attempts to determine which sentiment is currently valid for which market, ranging from fear to greed.

Why Investtech?

• Investtech offers automatically generated technical analyses of stocks, indices, commodities and currencies.
• Investtech’s analyses are objective and consistent because they are done by mathematical algorithms in computers.
• The analyses are time-saving.
• Investtech’s analyses have been proven to give good return over time.