Account Info
Log Out
No matches yet
Operations too frequent. Please try again later.
Please check network settings and try again Refresh Refresh
History record delete
    Quotes All >
      News All >

        What is Technical Analysis?

        Views 13k2023.08.09

        Key Takeaways

        • Technical analysis seeks to predict future market behavior by examining historical market data.

        • Technical analysis operates under three assumptions: the market discounts everything, price moves in trends, and history tends to repeat itself.

        • Traders typically use fundamental analysis to pick stocks and technical analysis to time their trades. 

        Understanding technical analysis

        Technical analysis is a strategy used to predict future stock prices by studying historical trading data— primarily price and volume. This technique can be applied to a number of securities, including stocks, futures, commodities, and fixed-income markets.

        Joseph de la Vega adopted early technical analysis techniques as far back as the 17th century to predict Dutch markets. However, the technical analysis theory as we know it was first introduced by Charles Dow in the late 1800s with the Dow Theory.In today's trading, technical analysis uses hundreds of patterns and signals that have been developed through years of insight and research.

        Assumptions of technical analysis

        Technical analysis is based on three underlying assumptions: 

        1. The market discounts everything

        Technical analysts believe that a security's price already reflects all publicly available information, including the company's fundamentals and broad market factors.

        2. Price moves in trends

        From technical traders' perspectives, the price movement will exhibit certain trends and patterns.

        3. History tends to repeat itself

        The repetitive characteristic of price movements is often attributed to market psychology as investors tend to act similarly in fear or excitement. 

        Technical analysis tools

        Hundreds of patterns and signals have been developed through years, making technical analysis more practical and systematic.

        In general, technical analysts look at the following broad types of indicators:

        • Price trends

        • Chart patterns

        • Volume and momentum indicators

        • Oscillators

        • Moving averages

        • Support and resistance levels

        The technical indicators listed above are usually used in combination to recognize the potential trading opportunities. 

        Technical analysis vs. fundamental analysis

        Fundamental analysis and technical analysis are commonly recognized as two different investing styles: 

        Fundamental analysts seek to figure out the stock's intrinsic value by studying everything from the overall economy and industry conditions to companies' financial state and management. On the other hand, technical analysts try to evaluate the demand and supply of securities and focus on the historical data of stocks' price and volume.

        Fundamental analysis studies financial data (revenues, expenses, assets, liabilities, etc.) and analyzes fundamental indicators such as Return on Equity, Price/Earnings ratio, and Debt/Asset ratio. Meanwhile, technical analysis may look into charts as well as numerous technical indicators such as moving average (MA), rate of change (ROC), moving average convergence divergence (MACD). 

        Fundamental analysis is more suitable for long-term investments, while technical analysis predicts short-term market movements better.

        You may have heard that value investors commonly use fundamental analysis while only speculators use technical analysis. This is a complete misconception.

        As a matter of fact, in actual market trading, many professional traders use the two together. Fundamental analysis is usually used to pick stocks, whereas technical analysis is used to find a good, low-risk entry or exit point.

        Trade like a pro with moomoo

        Get free stock and start your professional trading today

        Terms and conditions apply right-arrow

        This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeline for any particular purpose of the above content.

        Moomoo is a financial information and trading app offered by Moomoo Technologies Inc.

        In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC)  and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC).

        In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS). Moomoo Financial Singapore Pte. Ltd. is a Capital Markets Services Licence (License No. CMS101000) holder with the Exempt Financial Adviser Status. This advertisement has not been reviewed by the Monetary Authority of Singapore.

        In Australia, financial products and services available through the moomoo app are provided by Futu Securities (Australia) Ltd, an Australian Financial Services Licensee (AFSL No. 224663) regulated by the Australian Securities and Investment Commission (ASIC). Please read and understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other disclosure documents which are available on our website Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd. and Futu Securities (Australia) Ltd are affiliated companies.

        In Canada, order-execution only services available through the moomoo app are provided by Moomoo Financial Canada Inc., regulated by the Canadian Investment Regulatory Organization (CIRO).