Technical analysis is a method used to predict future price movements of securities based on their past performance, emphasizing that historical trends are likely to continue. It relies on quantitative factors such as price movements and trading volume, contrasting with fundamental analysis that considers both qualitative and quantitative factors. The document outlines the approaches, advantages, and disadvantages of technical analysis, highlighting its simplicity and utility alongside market unpredictability.

1. By:-
eFinanceManagement.com
https://efinancemanagement.com/financial-analysis/technical-analysis
Technical Analysis

2. 1. Meaning
2. Assumptions
3. Difference – Technical vs Fundamental Analysis
4. Inputs used in Technical Analysis
5. Approaches to Technical Analysis
6. Advantages & Disadvantages
7. Reference
Content

3. Technical Analysis is a method to analyze how the price of financial security will move in the near future on the basis of
its past performance.
The basis of Technical Analysis is the notion that there is a high probability that in near future, security will perform in a
similar manner as it performed in the past. Also, the chances of deviation from its past path are few.
Meaning

4. • Past trends decide the future:
The basis of Technical Analysis is the belief that past trends decide the future course for any security.
• Pricing is the key deciding factor:
Technical Analysis believes the fact that pricing movement of security reveals everything about it. There is no need to
study other factors in detail like the financials of a company, its management details, and future prospects, economy and
its effect, etc.
Assumptions

5. 1. Key beliefs:
Technical Analysis believes that pricing of security and the volume of its trade is most important to decide the future
price movements of a security. While Fundamental Analysis analyzes the financial statements of a company, the quality
of its assets and liabilities, the quality of the company’s management, economic conditions in which a company has to
operate, etc. to decide the future trends of the security price movements of a company.
2. Qualitative & quantitative factors:
The basis of Technical Analysis is solely quantitative factors. Fundamental Analysis takes into account both quantitative
as well as qualitative factors.
Difference – Technical vs Fundamental Analysis

6. 1. Price of security
2. Charts
3. Volume
4. Security trends
5. Support and resistance level
6. Indicators
Inputs used in Technical Analysis

7. 1. Top-down Approach:
A broad-view analysis of the entire economy.
2. Bottom-up Approach:
Aims to figure out which securities are undervalued.
Approaches to Technical Analysis

8. Advantages:
• Simple and easy-to-use method
• Helps to find the best entry as well as exit points
• Helps to arrive at the support and resistance level
Disadvantages:
• Unpredictability of market behavior
• Doubtful repetition of historical investment patterns
Advantages & Disadvantages

9. Reference
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