A method of assessing historic data in order to anticipate or forecast future moves in the market.
Unlike fundamental analysis, technical analysis ignores the intrinsic value of a security, or in our case a currency. An assumption must be made that certain patterns such as price and volume trends will repeat themselves. Complex algorithms are computed to aid technical analysts.
There are many technical indicators, but only a handful is often used. However, the effectiveness and relevance may vary just as is the case with fundamental data. It is important to learn about the implications of an indicator before applying it as an extrapolation tool.
In addition to the indicators computed through specified formulas, technical analysis also include recognition of chart patterns and certain technical levels set by past price actions.
Technical analysis is often described as a method to determine the “when” while fundamental analysis is often used to explain “why”.
