WHAT DOES TECHNICAL ANALYSIS MEAN

Technical analysis means forecasting future price movements on the basis of historical data. This is done by studying and analysing the chart of a particular stock. There are different types of charts on which one can study on, like – bar chart, line chart, point and figure chart & the candlestick chart.

Out of all these candlestick chart is the most commonly used chart type for technical analysis. Technical analysis is not completely based on only chart reading but technical tools and indicators are also used as confirmatory tools. One cannot completely rely on these tools as they might give false signals at times. Technical analysis does not include any sort of fundamental study about the company. One does not need to know any financial background about the company, no balance sheet reading is required.

All your technical studies are done on a plane vanilla chart where you analyse the price movement and trade on the basis of price action. You can plot your demand and supply zones on the chart and form a view about a particular stock accordingly. Technical analysis helps you to organize the overall market picture while it lays the path to rule based trading. Having a technical approach will be very important, especially during your first attempts to develop a personal trading style.

This sort of analysis is very commonly used amongst intraday traders and swing traders, these are people who want to gain profits from the markets without holding their position for too long. Technical analysis is an effective mean to trade the markets. If you want to invest in stocks, you must be well aware of the current market trends. By conducting technical analysis of stock charts, you will be able to learn about short term and long term trends which will help you take informed investment decisions. In order to invest in stocks, you must be aware of the historical and current stock trends and price fluctuations. And with the help of technical analysis, you get all the information you need to make a sound decision that doesn’t make you lose money.