Technical Analysis

Technical analysis studies the activity of market price. Technical analysts view any factor influencing a market to be reflected in the price of that market. By monitoring the movement of the price data, supply and demand market trends can be determined.  

Technical analysis can be defined as an approach to market forecasting that involves studying current and historical market price, volume, and in the case of futures, open interest. John Murphy, author of several well-known books on technical analysis, defines technical analysis as "the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends." Some analysts believe technical analysis also involves the study of human behavior as it relates to market trends and the laws of probability. Technical analysts believe that market history repeats itself, and that the historical trends and patterns that illustrate bearish and bullish markets will be seen again in the future.

Additionally, technical analysts believe that the various factors that affect a market- fundamentals, political, economics, and so on, will be reflected in the price of that market. By monitoring the price, market action (or trends) responding to supply and demand can be determined. Technical analysis is generally not concerned with the reasons for a particular price movement, but only with the price movement itself and the developing patterns that can assist in determining which way the market might move.

The "trend" concept, essential in technical analysis, is built around the premise that a trend moving in a particular direction has more probability of continuing in that direction than reversing; but does eventually reverse. Technical analysis can help you identify trends early in development in order to trade successfully in the direction of those trends. It can also help identify signs of trend reversals.

Technical studies are tools used to study market action. They are applied to charts to help you visually see market price action. These tools include drawing objects such as trendlines, indicators such as a moving average, ShowMe and PaintBar studies that enable you to see when certain market conditions occur (or reoccur), ActivityBar studies that enable you to look inside each bar of a chart and analyze price activity at the smallest component level (including each tick provided you have collected tick data), and ProbabilityMaps that enable you to see the varying probability of the direction of price movement, up, down or sideways.