Charts and patterns, price and time:technicals read the market's line.
The study of a market’s historical prices, through charts, patterns and indicators, to describe how it has been behaving.
It rests on the view that relevant information is already reflected in the price; its tools are calculated from past prices, and every pattern has cases where the expected outcome did not follow.
In plain words
Technical analysis studies the record of a market’s own prices, usually on charts, to describe how it has been behaving. It uses tools such as trend lines, levels where the price has turned before, recurring shapes called patterns, and indicators, which are calculations made from past prices.
See it move
Price chart and Trends
Why it matters
It gives traders a common language for describing a market and for deciding in advance where an idea would be judged wrong. It is usually contrasted with fundamental analysis, which studies the economy, interest rates and news instead of the chart.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
An indicator is arithmetic on past prices: take a pair’s last three closing prices of 1.1000, 1.1020 and 1.1040.
- 1Sum1.1000 + 1.1020 + 1.1040 = 3.3060.
- 2Average3.3060 ÷ 3 = 1.1020.
- 3When the next close arrives, the oldest price drops out and the average is worked out again.
The three-period moving average is 1.1020, a number built entirely from prices that have already happened.
A common mistake
Technical analysis does not forecast with certainty. Indicators are calculated from past prices, so they describe what has happened, and every pattern has cases where the expected outcome did not follow.
Check yourself
Learn more
- ExplainerThe golden ratio in technical analysis: how Fibonacci tools are builtRetracements, extensions, fans and time zones all come from one number, 1.618. This is how each tool is constructed, how traders read it, and where its limits lie.
- GuideJapanese candlestick patterns: a visual vocabularyDojis, hammers, engulfing bars and stars: what each pattern looks like, what it is taken to say about buyers and sellers, and why context matters more than the shape.
Educational information, not investment advice or a recommendation to trade.