Home › Academy › Technical analysis

Intermediate · Lesson 1 of 9

What technical analysis is (and is not)

6 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

Technical analysis studies price and volume history to judge supply and demand, trend and momentum. Fundamental analysis asks what a business is worth; technical analysis asks how the market is behaving and when to act.

The evidence is mixed. Academic research has found that medium-term momentum (shares that rose over the past 6-12 months tending to keep rising for a while) and long-term trend-following have worked across many markets and decades, though with painful periods. Many short-term chart patterns have weak or no evidence once trading costs are included.

Used well, technical tools help with timing, position sizing and risk control (for example, defining in advance where you would admit you are wrong). Used badly, they become pattern-spotting in random noise.

Key takeaways

  • Technicals answer "how and when", fundamentals answer "what and why".
  • Momentum and trend-following have the strongest evidence.
  • Use charts for risk control, not prediction certainty.

Check your understanding

1. Which technical effect has the strongest academic support?

  • Head-and-shoulders patterns
  • Medium-term price momentum
  • Fibonacci levels
  • Astrology cycles
Show the answer

Medium-term price momentum. Momentum has been documented across markets and decades.

2. A good use of technical analysis is...

  • Guaranteeing profits
  • Planning entries, exits and stop levels
  • Replacing all research
  • Predicting exact prices
Show the answer

Planning entries, exits and stop levels. It is most useful for timing and risk management.

Go deeper

Practise this in Vestora

Look up real shares, test ideas with paper trading, and track your progress through the course.

Open the app free

General education only, not financial advice. Examples are illustrations. Rules, tax settings and products change; check official sources.