Now that we’ve spoken about fundamental analysis, what it means and what it consists of, let’s take a closer look at technical analysis.
What is technical analysis?
Unlike fundamental analysis, which is concerned with an asset’s intrinsic value and what its price should be, technical analysis focuses more on pattern recognition.
Technical analysis is a subjective art based on using past price movements to predict future outcomes. Put simply it helps investors to predict what will happen in the future by looking at what has happened in the past.
Why is technical analysis useful?
It’s a common misconception that all there is to technical analysis is lots of charts. There are plenty of skills involved in technical analysis which if applied, and applied correctly, are able to increase the probability of a winning trade by predicting the likely price action.
Technical analysis can be looked at as another way of reducing your risk.