Future direction of financial markets

Technical analysts seek to identify price patterns and trends to determine the future direction of financial markets. While technicians use various methods and tools, the study of price charts is primary. Technicians especially search for archetypal patterns, such as the well-known head and shoulders or double top reversal patterns, study indicators such as moving averages, and look for forms such as lines of support, resistance, channels, and more obscure formations such as flags, pennants or balance days to decide the future direction of financial markets. Technical analysts also extensively use indicators, which are typically mathematical transformations of price or volume to decide the future direction of financial markets. These indicators are used to help determine whether an asset is trending, and if it is, its price direction. Technicians also look for relationships between price, volume and, in the case of futures, open interest to decide the future direction of financial markets. Examples include the relative strength index, and MACD. Other avenues of study include correlations between changes in options (implied volatility) and put/call ratios with price to decide the future direction of financial markets. Other technicians include sentiment indicators, such as Put/Call ratios and Implied Volatility in their analysis to decide the future direction of financial markets.

There are several schools of technical analysis. Adherents of different schools (for example, candlestick charting, Dow Theory, and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one school to decide the future direction of financial markets. Technical analysts use judgment gained from experience to decide which pattern a particular instrument reflects at a given time, and what the interpretation of that pattern should be to decide the future direction of financial markets.