Technical Analysis Explained

Thursday, November 26, 2009

Hi everyone,

Welcome to my blog on my views of the world markets. I started this with the intention of keeping up with the current market trends around the world and giving my take on them.
I started off as a fundamental trader and now I do mainly technical trading.

Why technical trading you may ask?
Lets just start with understanding what technical trading/analysis actually stands for.

What Does Technical Analysis Mean?
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

Technical analysts believe that the historical performance of stocks and markets are indications of future performance.

E.g. At an apparel shop, a fundamental analyst would go around trying out clothes before deciding whether to buy a particular design. By contrast, a technical analyst would observe the types/designs of clothes most people purchase and measure the popularity of each before making a purchase. Disregarding the intrinsic value of the products, the technical analyst's decision would be based on the patterns.

Likewise in trading, a stock only moves in price when there is interests generated in it. Even the strongest company would require continual interest for its price to head up.
See? Technical trading is very much on human psychology and the current buying trends.
I'll attempt to explain further in future posts.

For one sure thing, CHARTS DON'T LIE.