Technical Analysis can be defined as a study of the stock market considering factors related to the supply and demand of stocks. Technical Analysis doesn't look at underlying earnings potential of a company while evaluating stocks (unlike fundamental Analysis). It uses charts and computer programs to study the stock's trading volume and price movements in the hope of identifying a trend. In fact the decision made on the basis of technical analysis is done only after inferring a trend and judging the future movement of the stock on the basis of the trend.

Technical Analysis assumes that the market is efficient and the price has already taken into consideration the other factors related to the company and the industry. It is because of this assumption that many think technical analysis is a tool, which is effective for short-term investing.

Technical Analysis is done by identifying the trend from past movements and then using it as a tool to predict future price movements of the stock. It can be done by using any of the following methods:

• Moving Averages - This method is used to predict the trend and specify various support and resistance levels in the short and long term period. Most commonly used moving averages are 30 DMAs and 200 DMAs, where DMA means Days Moving Average.
• Charts & Patterns - Some analysts’ uses charts and patterns to decide on the trend and then judge the future movement. The tool used by such analyst is converting the chart in one of the many form of many shapes commonly formed by stocks.

If we use only technical analysis in itself and do not consider other aspects it is very unlikely that we will have much success in the long run, particularly in case of short-term investments. But if we use Technical analysis along with fundamental analysis or discount the industry and company related news while considering the valuation, our chances of minimizing the risk brightens.