They differ in the extend of their wrongness, and it is usually possible to improve any forecast by gathering further relevant information or by processing in a more elaborate way, what is already known. This costs money and time, the expenditure of which can only be justified if greater benefits can be obtained. By using plotting and various mathematical models and analysis, technical analysts hope to be able to predict future changes in the price of a particular stock. By looking for particular patterns on a price chart of a stock, for instance, technical analysts try to figure out the direction that the stock's price is likely to move in the future.
Many new traders have a tendency to confuse trading systems and technical analysis indicators.
The majority of the confusion comes in the form of confusing the use of technical analysis indicators with systems. A technical analysis indicator is used to determine the trend of a market, the strength of the market and the direction of the market. A technical analysis indicator may be specific or non-specific. Some technical analysis indicators can be quantified in the form of an equation or algorithm. At some point, the technical analyst will receive a signal.