Technical analysis is a method of evaluating securities by analyzing price movements, volume, and chart patterns to predict future price trends. Unlike fundamental analysis, which focuses on a company’s financial health and economic factors, technical analysis relies purely on market data.
Key Idea: The stock market moves in trends, and these trends can be analyzed to predict future price movements.
Main Principles:
Criticism:
Fibonacci Retracement is a technical analysis tool used to identify potential support and resistance levels based on key percentage levels derived from the Fibonacci sequence. Traders use it to determine where price corrections may end before the trend continues.
The Fibonacci sequence is a series of numbers where each number is the sum of the two preceding ones (1, 1, 2, 3, 5, 8, 13, 21, etc.). The key retracement levels are derived from the golden ratio (1.618) and its inverses.
📌 0.0% – No retracement (full trend intact).
📌 23.6% – Shallow retracement (weak pullback).
📌 38.2% – Moderate retracement (common in trends).
📌 50.0% – Psychological level (not technically Fibonacci but widely used).
📌 61.8% – Golden Ratio, strong support/resistance zone.
📌 78.6% – Deep retracement (often precedes reversals).
📌 100.0% – Full retracement (trend failed).
These levels act as potential support and resistance zones where price might reverse or continue the trend.
Elliott Wave Theory is a technical analysis method that helps traders predict price movements by identifying repeating wave patterns in financial markets. Developed by Ralph Nelson Elliott in the 1930s, this theory is based on the idea that market movements follow natural cycles influenced by investor psychology.
