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Technical analysis is the study of price data and statistical indicators that are created by market movement. Market activity demonstrates the course of supply and demand. This supply and demand is an indication of ideas and opinions translated into human behavior and exclusively, herd mentality. Therefore, technical analysts would squabble, price patterns and indicator signals can be categorized based on chronological data with a realistically high expectation that they will occur again at some point in the future. Technical analysts focus on the herd mentality and how it affects the individual.

TA is based on using patterns that have formerly cropped to forecast the moves of the prospect no two patterns are ever accurately the same. How can they be when you list the variables that decide price action: trading methodologies, the number of contestants, the participants themselves, order sizes, market liquidity, and the list goes on. Technical analysis is self-fulfilling. If a price prototype emerges it is not as though every technical trader defines precisely the same entry point and pulls the prompt at exactly the same time or the market would not function. Price would jump instantly causing massive slippage and incomplete fills and then subside as traders took their profits. The opposite of this would of course be true if technical analysis was deemed as a poor method of analysis. With enough technical knowledge, a robust trading formula and practical pattern recognition you have a strong basis for a profitable edge. The fact that traders use different entry techniques, price patterns, technical indicators or no technical analysis whatsoever means that there is just enough self fulfilling prophecy present to give technical analysis profit potential.

Moving away from the idea of the self-fulfilling foretelling is the study of market psychology and herd mentality. Your skill to read this is an integral part of trading. Technical analysis is intended to give us a means to define this psychology and the consequential market action in the form of price or indicator patterns.

There is constantly a place for fundamental analysis in trading, even if this analysis is as essential as knowing when data will be released. In just the same way that technical traders react in a different way to the same price chart, fundamentalists will react differently to the same piece of news. Market reaction to fundamental news can be unpredictable and violent and the resultant price action will add another variable to the potential success of technical analysis.

Technical analysis can be used on all time frames. The universal consent is that the most significant price patterns and indicator set-ups are the ones that occur on the longer time frames, such as daily or weekly charts. It is the short-term price action that that paints the long-term picture and the long-term picture that has a determining effect on short-term moves.