Technical Analysis Fundamentals are important for anyone interested in stock market or who just want to understand the financial media.
Technical analysis and Fundamental analysis are two theories to use when making investment or trading decisions. From these two traditional investing theories, technical analysis is the oldest and the less popular. The majority of investors use fundamental analysis, judging by the number of fundamental reasons used by the investing professional s or experts on the financial media.
However, we should not conclude that the technical aspect on investing is worth nothing or it is reserved to a small club of privileged investors. Traditionally fundamental analysis and technical analysis are two opposed theories. In practice, they complete each other. Each one tells its side of the story.
Technical Analysis Fundamentals
To understand technical Analysis starts with an understanding of its fundamentals. Technical Analysis fundamentals are based on the idea that the same causes produce the same effects. Technical Analysts study charts of stock historical price and volume trend in order to forecast future stock price direction. The reason is that certain stock and volume patterns have in the past been found to be predictive of others. Technical Analysis is very useful in deciding when to buy or sell.
Unlike Technical Analysts, the fundamental Analysts argue that the share prices reflect the true economic value of the company’s business.
Without a strong theoretical basis, Technical Analysis is considered more like an art than a science. Therefore the question "why does it works" or to be neutral "does it works" remains open. For the opponents of Technical Analysis - It is a "self-fulfilling prophecy". It works only because many investors believe it works.
Technical Analysis is for all markets and all Investors
The beauty of technical analysis is that it can be used not only on a all organized markets but also by various investors. Technical analysis can analyse the market condition of any market whether it's a stock market, currency market or commodity market. The market need only to have enough economic forces to drive supply and demand without hindrance.Moreover, technical analysis offers a range of tools that meet the need of all investors, novice and seasonned, short-term and long-and-buy investors.
Technical Analysis: Charts, Price and Volume
Technical analysis is an effort to forecast future market activity by analyzing market data such as charts, price trends, and volume activity.
Apart from their geometrical or artistic form, Charts are very important tools that allow technical analysts to draw technical indicators. These indicators are measures of a stock's price, volume movement and investor sentiment over time and on any market.
As mentioned earlier, Fundamental analysis and Technical analysis cannot be used in isolation. They are two complementary investing theories. The success in stock investing depends on one of these theories. Technical Analysis is not only important in making short-term investment or trading decisions but also in timing when to enter or exit a trade at any time.
This complete our brief overview of the technical analysis fundamentals.
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