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Technical analysis
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Technical analysis is a fundamental tool for investors who wish to operate on the Stock Exchange. It is based on the study of stock price and volume charts, using indicators and patterns to identify trends and make buying and selling decisions. One of the main assumptions of technical analysis is that the price of a stock reflects all available information about it. That is, all news, economic and political events that may affect a company's performance are already reflected in the share price. In this way, technical analysis seeks to identify patterns and trends in charts that may indicate future price movements. There are several technical indicators that can be used in technical analysis. Some examples are moving averages, Bollinger bands, Relative Strength Index (RSI) and MACD (Moving Average Convergence Divergence). Each indicator has a specific mathematical formula and can provide different buy and sell signals. In addition to indicators, technical analysis also uses chart patterns to identify possible entry and exit points in the market. Some examples of chart patterns are triangles, flags, shoulders-head-shoulders, and double tops and bottoms. These patterns are formed from price behavior and can indicate trend reversals or continuation of movement. It is important to note that technical analysis is not an exact science and does not guarantee profits. It is just a tool that assists the investor in making decisions. It is essential to combine technical analysis with other types of analysis, such as fundamental analysis, which evaluates the company's fundamentals, such as profits, debt, corporate governance, among others. In addition, it is important to have discipline and emotional control when using technical analysis. Often, investors tend to get carried away by emotions and make decisions based on impulses or the fear of losing money. It is essential to follow a defined strategy and respect the previously established profit and loss limits. In summary, technical analysis is an important tool for investors who wish to operate on the Stock Exchange. It uses indicators and chart patterns to identify trends and market entry and exit points. However, it is essential to combine it with other types of analysis and to have discipline and emotional control to obtain consistent results.
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_What is one of the main assumptions of technical analysis?
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