Chapter 1: Introducing technical analysis
In this chapter I’ll describe technical analysis and outline its purpose and the reasons why you should use it, as well as the limitations of the method. I’ll also show you how to calculate profitability and how you can set yourself up so you can start using technical analysis. In later chapters I’ll describe in more detail technical analysis tools and techniques you can consider using.
Technical analysis is the analysis of trade prices to detect historical trends and trend changes to allow you to predict the most likely future scenario. The best way to analyse price action is with a chart, so technical analysis is also known as charting.
The purpose of technical analysis