Technical Analysis uses historical stock statistics, usually price and volume data, to forecast future prices. In layman’s terms, a technical analyst is one who finds a pattern in a stock’s data, makes the assumption that the pattern is going to repeat into the foreseeable future, and accordingly places his trade in the direction the pattern signals him.

Technical indicators are frequently used by technical analysts to help make their trading decisions. Popular technical indicators include Moving Averages, MACD, RSI, etc. Technical analysts essentially look for trends in the market. Their basic assumption is that a price of stock already has all information priced into it and that a stock is either always “trending” up, down, or sideways. Prices move in patterns and price action repeats itself. Charts are frequently used by technical analysts to help make their trading decisions.

For example, suppose a trader notices (usually with the help of a chart) that the previous 25 times, every time stock XYZ trended up 1%, it was followed by a downwards trend. Essentially, the trader has stumbled upon a “zig-zag” pattern: it seems that the market begins to sell the stock every time it trends up 1%. The trader has now created a signal: the next time the stock trends up 1%, he will look to sell the stock. Similarly, traders look for other such types of patterns to help make their trading decisions.

One can get started with Technical Analysis by researching the aforementioned popular technical indicators. Ensure that your trading broker offers charting tools as a part of your trading software.