Technical analysis is the study of asset prices in the attempt to determine the future direction of a market. Traders who use technical analysis tend to believe that the majority of available information is already incorporated in the value of an asset. Consequently, prices will always move in a consistent manner and identifying the ways assets have moved in the past will give a guide to the way they will move in the future.
Much time and effort for technical analysis is taken up with studying charts. Practitioners believe that the factors that influence prices, such as the effects of supply and demand, established trends, and other elements are clearly visible in any chart. Most price charts plot price movements over time or by volume of trades. Charts are often formatted via a trend line so that price direction can be easily read. Bar charts or candlestick charts are also used to display the high, low, open and close prices for each period.
Technical analysis can be particularly helpful in assisting an investor with entering, exiting, and managing the risk of positions. A number of analytical tools are available as described below.