The base of Technical Analysis


In financial markets ,generally, we make investment and trading decisions based on three disciplines - Technical analysis, Quantitative analysis and Fundamental analysis. Our focus here is not on both the Fundamental and the Quantitative but on the Technical.And as a result, it's essential for any serious trader to be keen on its tenets/assumptions.

What is Technical Analysis?

It is the discipline of identifying the direction of price based on the past data of market activity , such as volume and price.Hence, it cannot only be useful in finance, it can be useful in other fields which require forecast too. While Technical remains the simplest and the most important discipline most traders have to learn in trading, It is important to note that, historically, the field has evolved into the discovery of hundreds of patterns, indicators, and systems through years of research.


 The Tenets of Technical analysis

  1. The market discounts everything: Technical analysts believe that everything from an asset's fundamentals to its broad market factors and psychology have already been priced into its worth before any particular time.
  2. Price moves in trends: Technical analysts expect that prices, even in random market movements exhibit trends regardless of their individual and preferred chart timeframe. In other words, a currency's price is more likely to continue a past trend than move oppositely.
  3. History tends to repeat itself: Technical analysts believe that history tends to repeat itself. The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable based on emotions like fear, excitement and mood. Technical analysis uses chart patterns to analyze these emotions and subsequent market movements to understand trends. While many forms of technical analysis have been used for more than 100 years, people still believe they are relevant because they illustrate patterns in price movements which often repeat themselves.


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