Charting or "technical analysis" is the study of price dynamics in markets through the use of charts and quantitative / mathematical techniques to attempt to forecast price trends.

The main concept behind technical analysis is that all information is reflected in prices, both of which are published in the company reports and subject to analysis, as well as such information that leaks or is known only to various company stakeholders.

Technical Analysis is therefore based on the notion that trading information such as change in prices or volume discloses the direction of a stock’s price much before any such direction is realized through company publications. The techniques can be applied to any market with a comprehensive price history. Technical analysis does not try to analyze the financial data of a company, such as cash flow, dividends, and projection of future dividends; and due to this lack of fundamental analysis, technical analysis is sometimes derided by critics as having no predictive qualities. Technical analysts or technicians often counter with an industry favorite analogy: a fundamental analyst gives an hour long description of a company's financial health to a potential investor. Pleased with his presentation, the analyst asks, "Are there any questions?" The investor replies, "So is the stock price going up or down?"

Technical Analysis is less concerned with why a price moves (poor earnings, difficult business environment, poor management or other fundamental information sources) but rather focuses on which particular direction the price consistently moves in. For technical stock traders, profits can be made in any market by positioning themselves in the direction of the price trend. If the price trend is up, then look for opportunities to buy, if the price trend is down, then look for opportunities to sell.

Some academics dismiss Technical Analysis in spite of its widespread use for being too simplistic. Others are studying it and believe many of its tactics are useful. For example, in 2000, the Federal Reserve Bank of New York published a study that concluded that Technical Analysis had predictive power in exchange rate markets. In 2005, the US SEC, NYSE, and NASD amended their definition of "research analyst" to include both fundamental analysts and technical analysts. Formerly, a research analyst as defined by the aforementioned had to be a fundamental analyst and needed to pass a proficiency exam (Series 81). The rule now specifies that a person with demonstratable proficiency in Technical Analysis is also a research analyst. Thus, US regulatory agencies now view technicians and fundamental analysts on equal footing.

For further reading on Technical Analysis click here