Technical Analysis is a research technique to identify trading opportunities in the market based on market participants’ actions. The actions of market participants can be visualized in stock charts. Over time, patterns form in these charts, and each pattern conveys a certain message.

Its scope does not bind to a specific Asset Type. The TA concepts can be applied across asset classes as long as it has time-series data e.g. Currency, Commodity, Stock Market.

Expectations:

1. TA is best used to identify short-term trades. Use TA to calibrate the entry and exit points for long term investments.
2. Do not expect huge returns within a short duration of time. The right way to use TA is to identify frequent short-term trading opportunities that can give you small but consistent profits.
3. Trades based on technical analysis can last between a few minutes to a few weeks.

Technical Analysis helps in developing POV to identify trading opportunities.

1. Directional View.
2. Price at which one should buy or sell stocks.
3. Expected Risk.
4. Expected Reward.
5. Expected Holding Period.

TA is based on a few core assumptions.

1. Markets discount everything: This assumption tells us that all known and unknown information in the public domain is reflected in the latest stock price.
2. The how is more important than the why
3. Price moves in trends: All major moves in the market are an outcome of a trend. The concept of trend is the foundation of technical analysis.
4. History tends to repeat itself: The price trend tends to repeat itself. This happens because the market participants consistently react to price movements in remarkably similar ways every time the price moves in a certain direction.

A good way to summarize the daily trading action is by marking the open, high, low, and close prices, usually abbreviated as OHLC. Close is the most important metric as it denotes the closing sentiment of the Day.