October 7, 2007
An Introduction to Stock Technical Analysis
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There are basically two types of analysis used in stock markets – the fundamental analysis and the technical analysis. In this article we will be dealing more with the technical analysis. |
There are basically two types of analysis used in stock markets – the fundamental analysis and the technical analysis. In this article we will be dealing more with the technical analysis.
Companies that goes with technical analysis looks into charts for peaks, ups and downs, trends and other factors that can greatly affect a stock’s performance on the market.
Stock technical analysis is one of the most widely used form of influences in stock buying and selling, but contrary to this it is only a few of those people who are quite successful in using this analysis technique.
Stock technical analysis is more of an evaluation of the securities of a certain stocks based on the patterns and trends caused by the market activity.
Stock technical analysis does not determine nor quantify a security’s fundamental value; rather they look into the stocks patterned performance and from that derives a report or analysis about the stocks would be future performances.
So listed below are some of the materials and charts that are used by analysts to technically analyze a stock.
Charts are important in a stock analysis and one good example of a widely used chart is the Bar Chart. A bar chart is mainly made up of one vertical line which represents the highest and lowest price point of a stock and two horizontal lines which represents the opening and closing of a stock price.
The benefit of using a bar chart against a line chart is the entities available on bar chart. In a Bar chart you will be able to see the lowest price point of a stock and it’s highest and also you will be able to determine its opening price and closing price for a particular time span.
The next chart that is used in a stocks technical analysis is the candlestick charting. Candlestick charts has been around for years now and have originated from Japan that’s why they are commonly called as “Japanese candles”. Same with the bar chart the candlestick chart is also essential in a stocks technical analysis because it also shows the opening, closing, lowest and highest price points of a stock.
Another indicator and one of the easiest to understand in a stock’s technical analysis are the moving averages. It simply shows and predicts the outcome of a price point by dividing the sum of a calculated stock price over a certain time period. It shows the average of a price security over a span of time.
The most used moving averages are 20, 30, 50 and 100 sometimes 200 is also used. The process of calculating a moving average is by getting the sum of the prices in lets say a period of 20 days and dividing the answer into 20 parts.
Basically if a stock price moves below its moving average that would be a negative sign for a stock trader because that would mean that the stock price is moving on a bad path and may be on a downfall.
Technical analysis is one of the most widely used analysis for stock and this article serves just a small amount of information about it. There are hundreds and thousands of textbooks around which you can actually learn in depth stocks technical analysis.
But experience conquers them all, if ever you had fall down in stocks just move on and charge it to the experience, learn from it and continue to educate yourself about stocks this way you will be able to learn by your own means and develop strategies within your own unique terms.
Recommended Reading
- Technical Analysis Part One
- Technical Analysis: Predicting the Future Market through Technical Analysis Chart Patterns
- Technical Analysis Charts: Generated Figures Synonymous to Profits
- Technical Analysis Chart: Predicting the Market
- Technical Analysis for Predicting Stock Movements
