Technical Analysis in Investing: What It Is and How It's Used

By Kristi Waterworth – Updated Jul 30, 2025 at 6:36 PM EST | Fact-checked by Frank Bass

Key Points

Technical analysis predicts stock movements using historical data, focusing on price and volume.
It's mainly used for short-term trades but can complement long-term fundamental analysis.
Limitations include potential bias and the unreliable nature of solely using past data for prediction.

There are lots of ways to evaluate stocks as potential investments, including the use of market activity to predict future movements. This is called technical analysis, and there's a subset of investors who rely heavily on it. Read on to learn more about this type of analysis.

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Chess pieces standing on digital financial charts. — Image source: Getty Images.

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Some academics also believe there's literally no value in the historical data that technical analysts use, but this is a somewhat flawed argument since the same could be said about past business performance. People do tend to repeat behaviors over and over, which is what technical analysis considers. However, it's unlikely for all the elements that create a behavior to be exactly in line again and again.

Another argument against technical analysis is that results may be more of a self-fulfilling prophecy than an actual result of the analysis, since many technical analysts can influence prices up or down based on their behavior. If everyone is making the same calculations based on the same observations, it's easy to accidentally skew the results in the short term.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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