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Technical Analysis of Stocks

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Technical Analysis of Stocks

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  • Feb. 2013
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INTRODUCTION
TECHNICAL ANALYSIS
Technical Analysis is important to form a view on the likely trend of the overall market, and it is helpful to have some idea of how to go about selecting individual stocks. Naturally, all investors would like their investments to appreciate rapidly in price, but stocks, which may satisfy this wish, tend to accompanied by a substantially greater amount of risk then many investors are normally willing to accept. However, it is important to understand that investors can be very conscious when it comes to stock ownership. Technical analysis is the use of numerical series generated by market activity, such as price and volume, to predict future price trends. The techniques applied to any market with a comprehensive price history. Primarily, but not exclusively, technical analysis is conducted by studying charts of past price movement. Many different methods and tools are used in technical analysis, but they all rely on the assumption that price patterns and trends exist in markets, and that they can be identified and exploited. Technical analysis or charting is considered to be as a supplement to Fundamental Analysis of securities. As an approach to investment analysis technical analysis is radically different from fundamental analysis. While the fundamental analysts believe that the market is 90% logical and 10% psychological, the technical analysis assumes that its 90% psychological and 10% logical. Technical analysis can be applied to any market with a comprehensive price history. The premises of technical analysis were derived from empirical observations of financial markets over hundreds of years. Perhaps the oldest branch of technical analysis is the use of candlestick techniques by Japanese traders at least as early as the 18th century, and still very popular today. DOW THEORY ITS CORNERSTONE

New tools and theories have been produced and existing tools have been enhanced at a rapid rate in recent decades, with an...