Technical analysis involves the study of past price movements to forecast future price trends. Technical analysts are also called chartists because they use a variety of charting techniques to identify patterns in market data. To identify trading opportunities, technical analysts look for:

Trend lines
Support and resistance levels
Moving averages
Other market phenomena

The assumption is that all fundamental factors are already automatically reflected in prices. Some traders use only one type of data analysis, but many use some form of both.
 

Technical analysis covers an extremely broad spectrum of concepts and techniques. Many technical methods are quite complex, relying on reams of statistical information. Other technical methods may be simple and are based on rather simple visual interpretation of a price chart.

Technical analysts/traders gather price data and organize it into various formats. Most formats provide a picture of market activity that analysts then use to predict price movement in the future. Analysts typically develop market forecasts based on patterns that take shape on the charts they use to keep track of prices.

They also make predictions based on mathematical calculations that indicate whether a market might have embarked on a trend. In practice, they usually use two or more technical methods in combination to enhance the effectiveness of their market analyses.

The formats that technical analysts use to organize price data fall into three general categories:

1. Bar charts
2. Trend indicators
3. Character of market indicators
 

A key concept in technical analysis is that of support and resistance - the price levels from which a market repeatedly rebounds (support) or declines (resistance).

1. Support: demand exists, buyers enter market
2. Resistance: supply increases, speculators often decide it is time to sell

Trend indicators are probably the second most common way of organizing price data. The most popular trend indicator is the moving average. It is easy to construct and can be used alone or in conjunction with other technical methods, such as bar charting. Moving averages can also be smoothed or optimized to fit different markets and market conditions.