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A method of evaluating securities by analyzing statistical trends from trading activity, such as price movement, volume, and chart patterns.
Technical analysts (also called chartists) believe that historical price and volume patterns can predict future price movements because market psychology creates recognizable patterns that repeat. Common tools include moving averages, RSI, MACD, Bollinger Bands, support/resistance levels, and candlestick patterns. Technical analysis operates on three principles: (1) the market discounts everything, (2) prices move in trends, and (3) history tends to repeat itself. While academics have largely been skeptical of technical analysis, many professional traders use it as part of their decision-making process, particularly for timing entries and exits.