Have you ever heard about Fibonacci, moving averages or candlestick charts? These are some of the basic tools of technical analysis. Technical investors believe that all information about a given population can be transformed into part of the review of its past and current statistics, as the trend of stock trading volume and stock price chart (Chart value of shares changed over time). Then, mathematically analyzed the behavior of graphics and use of statistical analysis can identify trends indicate that the future behavior of prices.
There are three basic assumptions of technical analysis. The first is that stock prices reflect all that you need to know; so that technical analysts believe that the main factors and market psychology is already at a price in the price. Secondly, technical analysis suggests that the stock price moves in trends. This means that following the trend of further development, are more likely to continue in the same direction as against him.
Lastly, technical analysis, is largely based on the assumption that the historic nature as to repeat it. In other word, this means that investors usually react more or less equally to similar events in the market.
Although it may seem simple, there are almost an infinite number of mathematical methods and tools of technical analysis. Most technicians will first try to determine the overall trend of price changes, to determine whether this trend upwards or downwards. The mathematical model describing such as moving averages, oscillators and other indicators are a tool with which technical investor for the purposes of this analysis.
Then, investors are beginning to understand the smallest detail in the trend and see if there is support or opposition to this trend. For example, the upward trend with support for the volume of trade can be a good indicator of share prices continue to rise. This may be a good time to buy shares. On the other hand, if there is strong resistance against the upward trend, this is a good time to sell the stock.
Technical analysis is not easy and certainly not absolute. In addition to technical investors want to know more details. They also want to know, for example, the particular form of graphic design, but they can be considered as a form of head, shoulder, cup or even a pen.
There are many debates both in academia and the private world on the ability of these methods in order to beat the market methods. Studies typically show that technical analysis does not work in the long run, but it is much harder to prove that in the short term, since many of the technical analysis of the findings are not conclusive.