Technical analysis was derived from observing financial markets for the past decade. This method being the oldest was discovered and developed by Homma Munehisa during the early eighteenth century and progressed to the candlestick method whereby in modern day is a charting tool for technical analysis.
A variety of charts "graphs" are used to prices over time, although they do not show absolute predictions about the future prices. Technical analysis is similar to forecasting the weather in that the future financial price is based on the past price movements.
Technical analysis is only interested in the market price movements, it makes analysis of the company characteristics and estimates the company's value or commodity. In other words a study is done on supply and demand in a specific market, and determines in which direction or trend it will rear to in the future. The market is studied itself in order to understand the emotions and not the components of the market. This enables you to be a better trader or investor.
Technical analysis is a vast topic. It is based on three assumptions – whereby history repeats itself and prices move in trends, as well as the market will discount everything. Analysts are not perturbed if stocks are undervalued; what matters is the security of past trading stats and what information the past stats can provide as to where the security will move in the future.
Technical analysis is often referred to as market technicians or technical market analysis and now and then you will hear the term chartist used. Patterns are exploited when technical analysis uses price patterns to identify trend in the financial market.
History keeps repeating itself; in that investors will form the same pattern their predecessors used. The sentiments of investors can be seen and heard time and again. And due to this repetitive pattern by investors technical analysis is very predictable and the chart will be formed by the obvious price patterns.
Price trends are not always limited to price trends many surveys are monitored by technical analysis by investor sentiment. The attitudes of participants on the market are gauged specifically as to whether the participants are bullish or bearish. The technical analysis uses this trend to determine the continuation of a reversal development in order anticipating change in the investors market.
If the price has gone up then the trend is up, and vice versa if the price is down the trend will be down as well. When a trader finds that he cannot make a decision if the price is up or down he will declare this to be unclear. But when the prices are going back and forth across a range it is termed as sideways.
