Explain what technical analysis is and discuss the relationship between technical analysis and behavioural finance.

Expert Solution

Technical analysis is the analysis which is used to find the prices of the stock by following a combination of volume and price action and trends related to historical prices and volume.

Technical analysis is generally referred for trading because it is used by certain investor for creating short term positions in order to formulate an entry and exit on to various stocks based upon the price and volume.

there is a relationship between technical analysis and behavioral finance because behavioral finance is the study of behaviour of the investors into the market, whereas technical analysis is trying to find a pattern of those behavioral finance into the market because technical analysis is trying to find a trend of the price behaviour and volume behaviour of various market participants in past and these behaviours are generated by behavioral finances of various traders because there is a certain trend in the the price behaviour and volume behaviour of various investor in the past performance and they are expecting that those performance would be repeated in the future so these are reflection of behavioural finance.

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