Technical analysis is an analysis method based on past market behavior such as trading volume and prices, thereby predicting future trends of commodities.

Technical analysis is simulated by charts and graphs for investors to grasp market movements, analyze supply and demand fluctuations for stocks to help investors decide when to buy and sell for a profit. Technical analysis is one of the important knowledge to have when participating in financial investment.

How does technical analysis work?

Technical analysis can basically be understood as the analysis of supply and demand effects of the market, which is said to be a factor that determines the overall sentiment of the market. Or it can be understood that the value of an asset will reflect opposing buying and selling forces. These forces govern the emotions of investors and traders (mostly fear and greed)

Notably, technical analysis is said to be very reliable, much more effective when operating in a normal market, with high liquidity and large trading volume. High volume markets are less affected by price manipulation, and unusual external influences also produce false signals that render TA useless.

To be able to find favorable opportunities and check price levels, investors have constantly used charting tools known as TA indicators. These indicators help traders to identify existing trends as well as provide insights into future trends. Because TA indicators are prone to bias, investors always use a combination of different indicators as a way to reduce risk.