What Is Technical Analysis? Flashcards

Start here: what TA is, how it differs from fundamentals, why it works, and what it can't do.

  1. What is technical analysis? The study of price behavior, market structure, supply and demand, and crowd psychology, read straight from the chart. Read the guide
  2. How is it different from fundamental analysis? Fundamentals are "the what": is this a good business? Technical analysis is "the when": is this a good time to buy or sell it? Read the guide
  3. Why does technical analysis work? Charts show what people actually do. Buyers step in at lows, sellers at highs, and fear and greed repeat. Trading algorithms act on the same levels, which reinforces them. Read the guide
  4. Is technical analysis only for day traders? No. The same forces show up on every timeframe, from minutes to years. Long-term investors use it to decide when to add, wait or take profits. Read the guide
  5. Does technical analysis predict the future? No, it deals in probabilities. Even a setup that works 70 to 80% of the time fails the rest, which is why every trade needs a level where you're wrong. Read the guide
  6. The market is a voting machine and a weighing machine. What does that mean? In the short term it votes on emotion and narratives, which creates opportunities. In the long term it weighs real value. Read the guide
  7. Can a great chart save a bad business? No. Over the long term the stock follows the business's profits. No chart pattern can rescue a company that is going bankrupt. Read the guide
  8. Is technical analysis a complete trading strategy? No. It suggests what price may do next. You still need to decide your risk, position size, exits and rules, and stick to them. Read the guide
  9. Fundamentals or technicals: which should you use? Both. Fundamentals tell you whether a stock can go anywhere; technical analysis helps you time the entry and the exit. Read the guide

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