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This method attempts to create a set of tools that might tell an investor what other investors though about a stock at a given time. The most important indicators are specific chart formations that show certain price movements at times when trading volume is at a certain level.
Tools also include point and figure charts, logarithmic charts, and Japanese candlesticks
A Random Walk Down Wall Street shows that the predictability of stocks according to charts has proven inconclusive as to whether or not it works. Whenever a chartist's investments do fail, they seem to always claim that they failed to believe their own charts.
The basis of a random walk is that on any given day, a stock's price can go up or it can go down.
Arguments against technical analysis
Technical analysis assumes that certain chart formations can indicate market psychology about either an individual stock or the market as a whole at key points. However, if the market is believed to be efficient, all data utilized in technical analysis is available to everyone and any anomalies that would result in a profitable situation would disappear.
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