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Technical analysis definition
Technical analysis is a method of studying markets through past price movement, chart patterns, volume, and technical indicators. Traders use it to read market behaviour and judge where price might go next.
Technical analysis works on the premise that price already reflects the available information and that patterns can repeat, because traders tend to react in similar ways to support, resistance, trends, and momentum. It applies across forex, stocks, commodities, indices, crypto, futures, options, and CFDs, and it feeds entry, exit, stop-loss, and timing decisions.
Technical analysis differs from fundamental analysis. Technical analysis reads the chart and asks what price is doing, while fundamental analysis reads the underlying data, such as interest rates, earnings, or supply and demand, and asks what an asset is worth. Many traders combine the two, since technical analysis times an entry while fundamentals explain the move. It forecasts nothing with certainty, so it pairs with risk management and confirmation signals.
Technical analysis Example
You analyse EUR/USD on a 1-hour chart and read two signals together.
Price is holding above support at 1.0800, and the RSI is turning up from an oversold reading. You treat this as a possible long setup.
You buy at 1.0810, set a stop loss at 1.0790, and place a target at 1.0890, risking 20 pips to make 80:
80 pips / 20 pips = a 1:4 risk-reward ratio
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