Sunday, March 13, 2011

Market Lesson – Technical Analysis

Technical Analysis is a financial market tool used by many traders to forecast future price direction of securities through past performance.

Technical analyst use indicators and tolls such as relative strength, volume, candlestick charts, trend lines, pivot points, line charts, bar charts, moving averages, fibonacci, gan lines, as well as money flow in order to find the best stocks. Technical analysis is applicable to commodities, forex, stocks, indices and futures trading.

This technique is one of many used to find stocks but it is not a holy grail. Technical traders are usually concerned with two factors, what is the current price of the security and the historical price movement.

The only thing that technical analysis can do for the average investor is to help find out what might be the next most likely move to take place in a security over time. Just like a meteorologist predicting the weather there is always a possibility that they can be wrong. The time frames used can be based on intraday, weekly, monthly, quarterly or yearly charts. Prices can be determined by the open to the close of trading.

Technical analysts believe that long or short term trends can be found using technical analysis. They can then invest or trade the trend and make money. Like most traders say the trend is your friend until it ends.

Other investors choose fundamental analysis over technical analysis in order to find stocks based on the fact that they think it’s a much better tool. By using both technical and fundamental analysis together is the best tool for investors to make money in the financial markets. It might take a few years to understand how to use both fundamental and technical analysis together but in the end it will be worth it.

By: Marlin Rolle

No comments: