Stock market guide: What is technical analysis and why is it important? - Explained

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geometric patterns. Remember, while technical analysis can be helpful, it can't predict prices with certainty, so use risk management strategies. Technical analysis is a method used in the financial markets, to evaluate and predict future price movements of assets, such as stocks, commodities and currencies based on historical price and volume data.

The primary assumption behind technical analysis is that market prices move in trends and makes patterns as they move, and these patterns can be identified and analysed to make informed trading decisions. Also read: Shoora Designs IPO to open on August 17; check price band, key dates Technical analysts use price charts to visualize historical price movements of a particular stock or market. The most common types of charts are line charts, bar charts, and candlestick charts.

Recognizing trends in the stock market is crucial for investors and traders, as it can help in their investment/trading decisions. Technical analysis, which involves analysing historical price patterns, is commonly used to identify trends and potential turning points in the market. Trends in the stock market refer to the general direction or movement of stock prices over a specific period of time.

These trends can be categorized into three main types: Uptrend: An uptrend occurs when the overall movement of stock prices is upward over an extended period. In this trend, each successive peak is higher than the previous one, and each trough is also higher than the previous trough. Uptrends indicate a bullish market sentiment, where investors are optimistic and buyers dominate, leading to rising prices.