Technical analysis

A family of methods that take price and volume history as their only inputs. It is conventionally divided into chart reading, which identifies shapes and levels by eye, and indicator work, which applies arithmetic to the same series to produce a line or a reading. Both rest on the same stated premise: that the balance of information, expectation and constraint among participants is already contained in the price, so the price series is the thing worth examining rather than the causes behind it.

It contrasts with fundamental analysis, which values a market from data outside the price: earnings, output, policy rates, supply. The two answer different questions. Fundamental work asks what something is worth, technical work asks what its price has been doing and whether that behaviour has repeated. Many practitioners use both and describe the combination as timing an idea that was reached another way.

Whether any of it carries information is a real and long running argument, not a settled matter dressed up as one. The efficient market position holds that price history cannot predict returns, because anything predictable would already be traded away. Against it sit published studies finding persistent momentum and reversal effects in several markets, and against those sit the objections that the effects shrink after dealing costs, that they weaken once published, and that a literature searching thousands of rules will discover some that worked by chance. The honest summary is that technical methods produce statements about tendencies over many observations, not statements about the next move, and that most of the disagreement is about how large those tendencies are rather than about whether they have ever existed.