-Technical analysis refers to reading price charts to identify patterns and trends that can be used to make smarter trading choices.

-Compared to fundamental analysis that focuses on financial data and economic factors, technical analysts believe that past price movements and trading activity are the key into anticipating future movements in an asset’s price.

-Traders can interpret market data and predict potential price behaviour by using tools like support and resistance levels, moving averages and trendlines. 

-Technical analysis can be applied to any financial asset with enough historical price data. Whether you are trading stocks, forex, indices or ETFs, you can use technical analysis tools to create charts and patterns and predict the future price movements.

Fundamental principles of technical analysis

Technical analysis is based on key fundamental principles. Let’s have a closer look into the three main ideas of the method.

1.Price is the primary consideration, and technical analysts focus primarily on price movements. Price movements are not random, but rather follow trends that can be identified and exploited for profit.

2.Trends exist, and markets tend to move in a certain direction over time. There are three types of trends in technical analysis:

 uptrends, downtrends and sideways trends. Understanding and identifying trends is essential for successful trading and investing. By identifying the direction of a trend, traders can determine whether it is more favourable to buy or sell a stock or cryptocurrency. 

3.History repeats itself, and past price movements and chart patterns can provide valuable insights into future price movements. 

-Technical analysts use historical price data to identify patterns that may suggest the direction of future price movements.

The Philosophy Behind Technical Analysis

Technical analysis is rooted in several key philosophical principles:

1.Market Efficiency

Prices reflect all publicly available information, making fundamental analysis less relevant.

2.Crowd Psychology

Market participants’ emotions and behaviors create patterns and trends.

History Repeats Itself: Human nature and market dynamics lead to similar patterns and cycles.

3.Fractals

Markets exhibit fractal properties, with small patterns resembling larger ones. Market patterns repeat at different scales and timeframes.

4.Probabilistic Thinking

Technical analysis deals with probabilities, not certainties.

Adaptive Markets: Markets evolve, and technical analysis adapts to changing conditions