Technical Analysis – Introduction, Part 1 is one of the greatest articles about Stock Trading. There are numerous articles on the internet that examine Stock Trading, Technical Analysis – Introduction, Part 1 among which we suggest for you. Hopefully the posts that individuals convey below could be of use, raise information and be described as a alternative for you.
In the world of stock trading, there are two types of market analysis: fundamental and technical. For the most part, people from both schools of thought get along fairly well, but to say they come close to agreeing is a distant dream. Most retail traders (everyday people who trade the market) have been taught fundamental analysis to some extent. They are aware of the reality that stock prices are affected by earnings reports and that the overall debt load of a company can only be so high. Yet few understand why a stock’s price fluctuates so much from day to day. And that price change is exactly what technical analysis observes.
In its simplest form technical analysis could be considered chart-based behavioral finance. It is the study of how people react to stocks, futures, currency, or any other trading vehicle by observing their behavior through the price action of the commodity they are trading. In this series of articles I’m going to open your eyes to the world of technical analysis and show how you can use it to advance your own trading!
To be a technical analyst you must subscribe to the first rule of technical analysis. In fact, this first rule was presented more than one hundred years ago by Charles Dow, and it’s the foundation of all technical trading. It says this: All fundamental data has already been factored in to the price of a stock. In other words, the price is already reflecting that data. The theory here is that it doesn’t take long for people to figure out the fundamentals. In fact, special announcements not withstanding, core fundamental data really only changes four times a year when a company announces earnings. So why does the price of a stock keep changing on a daily basis-sometimes changing drastically within a small window of time?
The answer is speculation. And that’s what technical analysis observes. The reason the price of a stock moves despite relatively stable fundamental data is the extreme optimism, or pessimism, of the people trading that company in regards to the future release of fundamental data. Speculation is ultimately always fueled by human emotion. And since people tend to be creatures of habit, their emotions tend to be fairly predictable as well. And this is what technical analysis studies in depth.
In the remaining upcoming articles of this series, I’m going to address the core pieces of data we observe in making technical trading decisions. Here’s what we’re going to be discussing:
In just a few articles you are going to learn all you need to know about why technical trading is the best way to analyze your trades. This knowledge will not just make you a better trader but also a much more profitable trader.
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