Technical analysis

Technical analysis studies historical price and trading volume patterns to try to anticipate future price movement, on the premise that patterns of supply and demand tend to recur and that price already reflects available information. It contrasts directly with fundamental analysis, which values an asset from its underlying business or economic drivers rather than its trading history.

Common tools include moving averages that smooth price to reveal trend direction, support and resistance levels marking prices where buying or selling pressure has previously clustered, and chart patterns believed to precede particular moves, alongside signals drawn from the order book. Many of these rules can be encoded and tested systematically, which is how technical analysis feeds into quantitative trading and algorithmic trading strategies rather than remaining purely a discretionary, chart-reading practice.

Technical analysis is widely used in shorter-horizon trading, where fundamentals change slowly relative to price, and as a timing overlay on top of fundamentally driven decisions. Its central and long-running criticism is that it conflicts with the efficient-market hypothesis, which holds that past prices contain no exploitable information about future prices; empirical support for specific technical rules is mixed, and any edge from popular patterns tends to erode once widely followed, since a pattern's usefulness depends on it not already being priced in.