The study of market action, mainly by using charts for the purpose of forecasting future market trends with respect to price, volume, and open interest (in the case of futures and options). This type of analysis is generally based on three premises:
1) Market action discounts everything that can possibly affect the price (firm-specific performance, conditions of the wider sector or broader economy, political developments, psychological reactions, etc). 2) Prices follow trends. The whole purpose of studying charts is to identify trends (i.e., price motion in progress) in the early stages of their building up and development in order to trade in the direction of these trends. 3) History repeats itself. This has to do with human psychology which tends to be repetitive, a fact implying that understanding the future begins with studying and analyzing the past.
