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What is technical analysis?
Technical analysis is the study of past price movements, trading volume and open interest, usually on charts, in an attempt to forecast where prices go next. It ignores what the asset is or does and looks only at market data.
What it means for you
Every technical indicator is computed from past prices and volume: it describes what has already happened and does not tell you what happens next. Signals often conflict, and patterns that seemed to work before can stop working. No chart can show news or events that have not happened yet.
A common mistake: “Chart patterns show where the price is going.”
In fact: Patterns are drawn from past prices. The CFTC notes technical analysis can work consistently only if price movements are not a random walk, and that question is not settled.
How it works
The CFTC describes technical analysis as forecasting prices from patterns of price change, rates of change, and changes in trading volume and open interest, without regard to underlying fundamental factors. Charting plots trends, average prices, volume and open interest. Its vocabulary includes support and resistance, momentum, trend, and the labels overbought and oversold. The CFTC adds a caveat: technical analysis can work consistently only if the theory that price movements are a random walk is incorrect.
Source: CFTC Glossary · checked 4 October 2026
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