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Technical analysis
is the study of price movement and trend in markets in order to forecast
future prices. Technical analysis is primarily, but not exclusively,
conducted by studying charts of past price movement. Many different
methods and tools are utilized in technical analysis, but they all rely
on the principle that price patterns and trends exist in markets that
can be identified and exploited. Technical analysis is less concerned
with why a price is moving (e.g. poor earnings, difficult
business environment, poor management, or other fundamentals) than it is
with the fact that the price is moving in a particular direction
or in a particular chart pattern. To a technical analyst, profits can be
made in any market by positioning oneself in the direction of the price
trend. If the price trend is up, then look for opportunities to buy; if
the price trend is down, then look for opportunities to sell.
Additionally, technical analysts look for various price patterns to form
on a price chart and will take positions in anticipation of the expected
move following that pattern.
Technical analysis holds that because every possible bit of information
is immediately included in the price of a security, it is not necessary
to explicitly analyze the fundamental, economic, political, etc. factors
that might influence that price. Because all available information
influences the price movement, only a study of the price movement is
required.
Source: Wikipedia contributors (2006). Technical
analysis. Wikipedia, The Free Encyclopedia.
http://en.wikipedia.org/w/index.php?title=Technical_analysis&oldid=46273494.
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