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Technical analysis is a method of studying “historical price + volume” data to identify patterns, trends, and potential market behaviour. It is based on the idea that price and volume data can provide information about market activity.
If we talk about the technical analysis basics, they include the following:
Price Trends: Whether prices are generally moving upward, downward, or sideways.
Support and Resistance: Price levels where buying or selling activity has historically been significant.
Volume: The amount of an asset traded during a particular period.
Chart Patterns: Repeated price formations that traders may use as part of their analysis.
Indicators: Mathematical calculations such as moving averages, RSI, and MACD that are derived from price or volume data.
Technical vs Fundamental Analysis: How Do They Differ?
The primary difference between technical vs fundamental analysis lies in “what each method examines”. Note that technical analysis primarily studies price and volume data, while fundamental analysis examines a company’s financial and business factors.
For more clarity, let’s check out a detailed comparison below:
Technical Analysis
Fundamental Analysis
Studies price and volume
Studies business and financial data
Uses charts and indicators
Uses financial statements and company information
Primarily used for market timing and price analysis
Primarily used to assess business performance and valuation
Can be applied to different time horizons
Commonly used for longer-term company analysis
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