Definition for : Technical analysis

Technical analysis consists in studying the price history of financial securities in the hope of spotting the short-term trends. Technical analysis is based more on psychology than mathematics. It believes that while Investors are not perfectly rational, they at least are fixed in their way of reasoning, with predictable reactions to certain situations. Chartists look for these patterns of behavior in price trends. This approach is often used by traders who take positions for short periods, from several hours to several days. Technical analysis is one of the Stock-picking approaches. Technical analysis is also called Chart analysis.

(See Chapter 18 Risk and return of the Vernimmen)

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