Technical analysts use trend analysis to forecast the future movements of a certain asset. Past data is used to determine the trend's direction. The purpose of this technique is to identify investment opportunities that are currently trending higher, as well as downtrends so investors can exit before losing money.

The problem with trend analysis is that past behavior is not always predictive of the future; in other words, whatever a security's price has done in the past is not always indicative of what it will do in the future because many other significant factors play a role in determining its value.

Trend analysis is all about analysing past data so as to evaluate the direction of the trend, and be better able to predict the future movements. Since what happened before is not always going to show what is going to happen in the future, it is important not to base decisions on trade analysis only, but also factor in other elements.