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Technical analysis is a method of studying price movements to forecast future price developments. Instead of focusing on company results, this approach concentrates on charts, patterns and trading volumes. The underlying principle is that all available information is already reflected in the price.
Technical analysis attempts to identify patterns in price charts.
Investors who use technical analysis examine historical price movements to identify trends and turning points. They look, for example, at support and resistance levels, trend lines and indicators that signal whether a share is overbought or oversold.
The idea is that human behavior in the market tends to repeat itself, causing certain patterns to reoccur. Technical analysis is often used for shorter-term decisions, while fundamental analysis focuses more on the long term.
Short example:
Suppose a share repeatedly falls to €30 and then rises again. That €30 level is considered a support level. A technical analyst may decide to buy around €30, expecting the price to rebound once more.
If the share repeatedly fails to rise above €40 and then declines, €40 is seen as a resistance level. An investor may then decide to sell around €40.
Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult a professional advisor when making financial decisions. The information and tips provided on this website are based on the personal insights and experience of our analysts and are intended for educational purposes only.
