The methods used to analyze securities and stocks and make investment decisions fall under two very generic categories: fundamental analysis and technical analysis.
Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't look at the fundamentals of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market. It is more dependant on the emotions of the people buying and selling stocks and hence corresponds more closely with human behaviour.
Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor.
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