InvestorQ : What do we exactly mean by technical analysis in stock markets?
Priyanka Jain made post

What do we exactly mean by technical analysis in stock markets?

Answer
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Swati Naik answered.
1 year ago


In simple terms it is the study of charts. You gauge past trends and then you extrapolate to the future. Technical analysis studies past market action to try to gauge what the market might do in the future. But technical analysis is not just the study of price but also of volumes. The focus is on identifying trends that can be extrapolated and hence become a useful decision point. Try and contrast this with fundamental analysis and the way it is done. Fundamental analysis involves analyzing the fundamental attributes of a company like its profitability, efficiency, cash flows, liquidity etc in order to estimate its value. Technical analysis takes an entirely different approach and believes that the company per se does not have any value that you can elicit through fundamental analysis. Technical analysis really doesn't care about the worth of a company and is more interested in the price movements in the market and the trends that can be modelled and extrapolated.