What is Technical Analysis?
The method of forecasting the direction of price through the study of the market data primarily price and volume in finance and trading is called Technical Analysis.
Behavioural economics and the quantitative analysis used many of the same tools of Technical Analysis which being an aspect of the active management standards in contradiction to much model portfolio theory the efficiency of the both technical and the fundamental analysis is disputed by the Efficient market hypothesis which states the stock market price are essentially and predictable and research of Technical Analysis has produced mixed results.
• Tools or Method used for Technical Analysis
Technical analysts use a wide range of tools from which they can find Trends and patterns on the charts. The tools or methods used for Technical Analysis are moving averages, support and resistance levels, Bollinger Bands and more. All of the tools have the same purpose to make standing charge movements and identifying Trends easier for technical traders.
• Advantages of Technical Analysis
Technical analysis helps you to be able to identify the signals from price trends in the market is a key component of a trading strategy all traders need to work out the methodology for locating the best entry and exit point in the market and using technical analysis tools is a very popular way of doing so.
In fact technical analysis tools are so commonly used that many believe they have created self-fulfilling trading rules as more and more traders use the same in decanters to find support and resistance level there will be more buyers and sellers irrigated around the same price points and the factors will eventually be repeated.
• Disadvantages of Technical Analysis.
There will always be an element of market behaviour that is unpredictable. There is no definitive guarantee that any form of analysis – technical or fundamental – will be 100% accurate. Although historical price patterns give us an insight into an asset’s likely price trajectory, that is no promise of success.
Traders should use a range of indicators and analysis tools to get the highest level of assurance possible, and have a risk management strategy in place to protect against adverse movements.
• Tips for beginners Technical Analyst.
Stock charts technical analysis is not complicated
Many people are afraid that technical analysis of stock charts is a complicated issue. Well it can be if you want to use many tools and indicators available.
But when learned and done properly then you’ll find it easy, simple and really effective.
When using chart analysis you’ll find everything important about the company’s shares is included in the price, and therefore you need only watch and analyze price movements. That’s great because you don’t need to learn to read annual reports, for instance, what do earnings, P/E and so on mean!
And if you are an investor who likes to study fundamental values then it is good for you too. Technical reading of a price chart will provide very important know-how for timing your purchases and sales.
Why to use technical analysis of the stock market.
So why to use technical market research? It can help you a lot in plenty of tasks that are related to trading or investing.
The technical market research provides important information about price trends that help you to determine if you want to be an aggressive buyer or if you prefer to sell short shares. This analysis of share price charts also provides a good info that helps you with timing entries for your trades.
The technical chart reading gives you necessary info that should be used when you make decisions about what to do with opened trade or with an opened position in your investment portfolio. You can decide about the right trade management steps that must be done.
Learn to read stock charts
There are several different types of charts, but I recommend the one I believe is the best one: candlestick chart type.
They’re based on simple elements, candlesticks. Each candlestick represents one time period. It shows us how the price moved during this period. You can learn a lot from every single candlestick.
Find the best tools for technical chart analysis
When you want to learn to read charts properly then use good tools. They help to do this important task. I highly recommend using some good market charting software or using some market websites that provide good charts and tools for technical chart reading and research.
Keep your chart research simple
There are a lot of tools which can be used for a price chart analysis. These tools, mostly technical indicators, can turn your research into a nightmare. So my recommendation is to keep your technical market research simple. Do not use too many indicators. If you want to use some of them, then think about how to organize them in your chart analysis software.
Do not avoid technical analysis of stock charts. It is very useful way that could improve your trading or investing results. You only need to understand what is important and what is not.
Using technical chart analysis you can analyze stock market or individual market tickers that could be shares, commodities, currencies or bonds.