Technical Analysis

Technical Analysis is the study of price movement. The analyst usually studies the price action on the stock market by the use of quantitative techniques and charts. By looking at charts, you can identify trends and patterns which can help you find good trading opportunities. Simply put, technical analysis is the study of prices, with charts being the primary tool. The purpose of this type of analysis is to forecast overall price trends. A company's financial statements are less important in this type of analysis. Investors using technical analysis often use the advance-decline line, a tool that determines the difference between the number of stocks dropping in price and the number of stocks rising in price. Investors can create a net advance by subtracting total number of dropping prices from total number of advancing prices.
The roots of modern-day technical analysis stem from the Dow Theory developed around 1900 by Charles Dow. And of course, the widely followed Dow Jones Industrial Average is a direct offspring of the Dow Theory.
Technical analysis is based on three major conclusions about the market:
1. Price Discounts Everything:
2. Price Moves In Trends
3. Price Movements Are Historically Repetitive

Leave a Reply

Your email address will not be published. Required fields are marked *