what is technical analysis 
technical analysis is the use of historical market data to predict future price movements using insights from market psychology behavioral economics and quantitative analysis technical analysts aim to use past performance to predict future market behavior the two most common forms of technical analysis are chart patterns and technical statistical indicators investopedia jessica olahunderstanding technical analysistechnical analysis is a blanket term for a variety of strategies that depend on interpretation of price action in a stock most technical analysis is focused on determining whether or not a current trend will continue and if not when it will reverse some technical analysts swear by trendlines others use candlestick formations and yet others prefer bands and boxes created through a mathematical visualization most technical analysts use some combination of tools to recognize potential entry and exit points for trades a chart formation may indicate an entry point for a short seller for example but the trader will look at moving averages for different time periods to confirm that a breakdown is likely a brief history of technical analysisthe technical analysis of stocks and trends has been used for hundreds of years in europe joseph de la vega adopted early technical analysis techniques to predict dutch markets in the 17th century in its modern form however technical analysis owes heavily to charles dow william p hamilton robert rhea edson gould and many others including a ballroom dancer named nicolas darvas these people represented a new perspective on the market as a tide that is best measured in highs and lows on a chart rather than by the particulars of the underlying company the diverse collection of theories from early technical analysts were brought together and formalized in 1948 with the publishing of technical analysis of stock trends by robert d edwards and john magee 1candlestick patterns date back to japanese merchants eager to detect trading patterns for their rice harvests studying these ancient patterns became popular in the 1990s in the u s with the advent of internet day trading investors analyzed historical stock charts eager to discover new patterns for use when recommending trades candlestick reversal patterns in particular are critically important for investors to identify and there are several other commonly used candlestick charting patterns the doji and the engulfing pattern are all used to predict an imminent bearish reversal technical analysis uses historical market behavior to anticipate future movements while it can often be effective past performance is no guarantee of future results and traders should be careful not to over rely on any one analytical tool 