** "Technical analysis"** is an analysis methodology for Analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. As a type of active management, it stands in contradiction to much of modern portfolio theory. The efficacy of technical analysis is disputed by the efficient-market hypothesis, which states that stock market prices are essentially unpredictable, and research on whether technical analysis offers any benefit has produced mixed results. It is distinguished from fundamental analysis, which considers a company's a company's financial statements, health, and the overall state of the market and economy.
There are many techniques in technical analysis. Adherents of different techniques (for example: Candlestick analysis, the oldest form of technical analysis developed by a Japanese grain trader; Harmonics; Dow theory; and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation.
Comparison with fundamental analysis
Contrasting with technical analysis is fundamental analysis: the study of economic and other underlying factors that influence the way investors price financial markets. This may include regular corporate metrics like a company's recent EBITDA figures, the estimated impact of recent staffing changes to the board of directors, geopolitical considerations, and even scientific factors like the estimated future effects of global warming. Pure forms of technical analysis can hold that prices already reflect all the underlying fundamental factors. Uncovering future trends is what technical indicators are designed to do, although neither technical nor fundamental indicators are perfect. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.
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