What is the primary purpose of technical analysis in trading?

The primary purpose of technical analysis in trading is to forecast future price movements. This approach relies on historical price data and trading volume to identify patterns and trends that can suggest where prices are likely to move in the future. Technical analysts utilize various tools and indicators, such as moving averages, chart patterns, and momentum indicators, to make informed predictions about short-term price actions.

While evaluating company fundamentals is critical for long-term investing, technical analysis specifically focuses on price and market trends rather than company performance metrics. Additionally, determining supply levels falls under the broader category of market analysis and is typically integrated into technical analysis, but it does not encompass the entire purpose of using technical tools. Lastly, the establishment of long-term investment strategies leans more towards fundamental analysis rather than technical analysis, which tends to emphasize shorter time frames based on price trends rather than company fundamentals or long-term growth potential.