Technical analysis is the study of how past and present price action in a given financial market may help determine its future direction. At the same time, however, technical analysis should not be considered a crystal ball. Rather, the skills of a technical analyst are used primarily to help determine the highest-probability reactions to past and current price movement, as well as likely future price movement. Therefore, technical analysis is less about actually predicting the future and more about finding high-probability potential opportunities to trade in the financial markets.
‘‘Price action’’ refers to the patterned behavior of a market’s price movement. The primary components of price action analysis include trend, support and resistance, and chart patterns. Other aspects of technical analysis, including chart indicators and oscillators, are not considered components of price action, as they do not represent price action itself but are instead mathematical derivatives of price.
Kaynak: James Chan, Essentials of Technical Analysis for Financial Markets
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