InvestorQ : Why do we need to study technical charts at all?
Sam Eswaran made post

Why do we need to study technical charts at all?

Answer
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Aditi Sharma answered.
1 year ago


Nobody disputes that fundamentals are important to identify if the stock is attractive or not. But that alone is not enough. The price point and the point of entry matters a lot. But technicals have an advantage in that they capture past patterns and so indirectly they also capture human psychology. Since human psychology does not change substantially when it comes up against stimuli, chart patterns tend to repeat themselves over cycles of time.

One of the shortcomings of the fundamental approach to investing is that it does not focus on the levels of entry and exit. That is where technical charts come in handy. They are based on the assumption that all chart patterns tend to repeat themselves. As a result, one can extrapolate the future by studying the patterns emerging from past charts. But technical analysis, by itself is a vast body of knowledge and is largely predicated on interpretation of charts, graphs and chart patterns. These graphic patterns apply to price charts and also to volume charts.