Technical Analysis Definition

Technical analysis was defined as the art of identifying a trend reversal at a relatively early stage and riding on that trend until the weight of the evidence shows or proves that the trend has reversed.

Technical Analysis used numerous scientifically derived indicators to identify a trend reversal at a relatively early stage and ride on that trend until the weight of the Confidence shows or proves that the trend has reversed.

Major Technical Principle Technical analysis deals in probabilities, never certainties.

The technical approach to investment is essentially a reflection of the idea that prices move in trends that are determined by the changing attitudes of investors toward a variety of economic, monetary, political, and psychology.

The art of technical analysis, for it is an art, is to identify a trend reversal at a relatively early stage and ride on that trend until the weight of the Confidence shows or proves that the trend has reversed. The evidence in this case is represented by the numerous scientifically derived indicators.

Human nature remains more or less constant and tends to react to similar situations in consistent ways. By studying the nature of previous market turning points, it is possible to develop some characteristics that can help to identify market tops and bottoms.

Therefore, technical analysis is based on the assumption that people will continue to make the same mistakes they have made in the past. Human relationships are extremely complex and never repeat in identical combinations.

The markets, which are a reflection of people in action, never duplicate their performance exactly, but the recurrence of similar characteristics is sufficient to enable technicians to identify juncture points. Since no single indicator has signaled, or indeed could signal, every top or bottom, technical analysts have developed an arsenal of tools to help isolate these points.