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Understanding The Technical Analysis of Stocks can Help You Make Sound Judgements

You have reached this space which means that you have already completed the beginner’s steps towards active trading. Trading is a dynamic platform and therefore a sound research is necessary to be able to crack winning trades. Technical analysis involved studying a particular stock in order to predict its future position and drive profit. There are a number of studies available online with which you can read and understand the basic concepts of technical analysis.

There are mainly two methods used to understand securities and formulate investment plans: technical analysis and fundamental analysis. Technical analysis believes the price of the security already represents everything we need to know about the stock and focuses on price movements while fundamental analysis includes going through the company’s financial reports and evaluate the real price of the business.

Though technical analysis looks a little difficult but in reality it narrows down to the supply and demand persisting in the market and finding the direction of the price trend. Some may also put it as technical analysis wants to take advantage of the market sentiments rather than the fundamental factors of a stock. If an investor understands the limitations and advantages of technical analysis, they can unlock a whole new skill set and drive handsome profits in trades.

There are a number of institutes who offer technical trading courses so people can learn the right way to trade.

Technical analysis is based on 3 assumptions

  • Market discounts everything
  • Prices moves in trends
  • History tends to repeat itself

Market discounts everything: The first assumption is that the all factors including fundamental factors to market sentiments and others are already represented in the stock and there is no need to separately analyse these factors.

Prices moves in trends: Technical analysis assumes that stock moves a short, medium or a long term trend. A stock is more like to follow a trend which it has exhibited in the past rather than moving erratically. Many technical trading strategies are formulates keeping this in mind.

History tends to repeat itself: Analysts believe the history tends to repeat itself. Some movement that has happened in the past is likely to be seen again when similar situation comes up. It is mainly due to emotions like excitement or fear. Charts are prepared to analyse and understand these emotions and materialise on the first opportunity.

Technical analysis is a very old method of predicting a future price movement and has been used almost for 100 years now. If you wish to learn technical analysis, you can enrol in various online technical analysis courses and learn the basic of technical analysis. If one learns to use the knowledge of technical analysis judiciously, they can achieve great heights.

This is the basics to technical analysis and if you wish you can find more information online and start gearing for a whole new career opportunity waiting for you to grab it. Trading can really alleviate your financial condition if done with sound knowledge and experience.

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