What does technical forecasting rely on?

Technical forecasting primarily relies on historical pricing patterns and market volume to predict future market movements. This approach is grounded in the belief that past market behavior can help indicate future price trends. Analysts who employ technical forecasting utilize charts and technical indicators derived from price movements and trading volumes, enabling them to identify patterns that may suggest future performance.

By focusing on these historical patterns, technical analysis seeks to capitalize on market psychology and behavioral finance principles, assuming that market movements are not entirely random, but instead are influenced by collective trader behavior. Therefore, understanding how prices have reacted under similar circumstances in the past can guide traders' expectations for future price actions. This method does not consider economic indicators, sentiment, or government policy shifts, which are more characteristic of fundamental analysis.