SHARETIPSINFO >> Articles Directory >>Why Technical Analysis?
As a stock market investor you might be wondering why there is so much concern about technical analysis of the stocks. The fact is that technical analysis is the most viable way of predicting the future movement of the stocks. That is why experts and investors consider technical analysis to be the most reliable way of choosing the right time for investing in the stocks. By technical analysis one can rightly predict the movement of the stock and hence it is an effective way to determine when it is suitable to invest in the stock. That is why technical analysis is given so much importance by the experts and the seasoned traders. It helps to easily make out when it is the best time to invest in a particular stock so that you can make the best out of the trade. Where there is no surefire way to predict the price of the stock, technical analysis can predict the most probable price of the stock. That is the reason technical analysis is considered to be the primary criteria for deciding the margin for trading.
For investing in the stocks you have to first select the stocks that are most likely to appreciate in the future. This is of course the primary criteria for investing in a specific stock. But investing in these carefully chosen stocks do not really guarantee a profitable trade. If you invest in the stock when it has already reached the optimum price level, then it won’t be a wise decision to invest in that stock at that point. Therefore it is important to determine the right time for investing in any stock and for that technical analysis is the best solution you have got. Technical analysis is nothing but a method in which the price of the stock and trading volume and other factors are considered for predicting the future movement of the stock.
There are different methods that are followed for technical analysis such as Candle Stick Charting, Dow Theory, Elliott wave principle etc. While doing the technical analysis experts consider the past market, opening price of a particular stock, high and low price for that day, closing price of that trading day, volume of the traded stocks and the trend of the market. Considering the information different charts and graphs are prepared on the basis of different indicators like relative strength index, regressions, moving averages, cycles regressions, inter-market and intra-market price correlations. Once the charts and the graphs are prepared with the help of the set formulas, experts compare the pattern of the price movement with the past movement of that stock. While comparing these graphs it is ensured that the comparison is made on quarter to quarter basis. For example, if the present data is of the first quarter, it has to be compared with the first quarter results of the previous years for that particular stock. In this ways technical analysis of the stocks is used for predicting the future of the stocks. This is by far the most effective and trusted method for predicting the movement of the stock price.
This is the basic method that is followed for technical analysis. Of course there are some other complex calculations involved in the process and hence it takes to be an expert for flawlessly carrying out technical analysis of the stocks. So, if you new to stock market, it will take sometime for you to have a comprehensive knowledge about technical analysis. Of course there are some software and tools that are designed to perform technical analysis for you. These tools collect the information that are required for technical analysis through internet and then prepare the graphs for after analyzing the data and help you to predict the stock price. There are so many such tools that are available over the internet and can be used by even a novice after some training. So before you make the next trade at the stock market, do not forget to carry out a technical analysis of the stock to ensure that you make a profitable trade. Moreover, technical analysis of the stocks will also ensure that you do not miss a single opportunity to make a profitable trade at the stock market.
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