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Technical analysis
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Charting or technical analysis is the use of numerical series generated by market activity, such as price and volume traded, to predict future trends in that market. The techniques can be applied to any market with a comprehensive price history. Technical analysis does not try to analyze the financial data of a company, such as cashflow, dividends, and projection of future dividends; that type of analysis is called fundamental analysis.
While technical analysis is widely used (if only as one input among many) by both professional and amateur traders as a means of predicting future market moves, it is generally not used by economists in any academic sense.
Technical analysis implicitly rejects the efficiency of the market as understood in the efficient market hypothesis (EMH). That is, using technical analysis on a particular market implicitly assumes that that market is not efficient, as defined by EMH. The efficient markets theories basically argue that existing prices reflect all available information, and that future price movements will follow a path that will approximate to a random walk (Brownian motion) as they adjust to new information as it emerges. The theories further assume that all participants in the stock market have equal and instantaneous access to all information that might affect stocks. Read More….
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