September 26, 2010
Technical Analysis 101
If you want a definition of technical analysis think of patterns that forecast market by the direction and study of earlier market performances. It mainly keeps track of volume and prices. This done by watching what happens in various markets for long period of time.
Near the end of the 19th century the modern technical analysis was created by studying the Dow Theory. Carefully paying attention to different items on the market is how it is done. A pattern will begin to develop that can be followed.
When the pattern has been figured out then it can be exploited to achieve for cash flow. The more that is understood about the product and a market the more money that can be made. Traders and financial people are the ones that mainly use this method.
Most analysts believe that how the stocks fared in the past will indicate how the will act in the future. Learning from the financial past is supposed to tell the future so that certain decisions can be made.
Using different markets and the theory one could predict the fall and then subsequent rise of the market. However, this is not set in stone therefore most times investors use it as a guide to assist them.
A wide variety of charts is used to watch what has been taking place. There are long-term view charts and short-term view charts that the analysts use. Once they watch them long enough they use the information to trade or invest in an item.
There are experts on this theory, books and classes to teach people this way of investment. However some people think that this theory is not sound enough to use on a regular basis. The approach that is used is called a top-down approach. The information that is gathered can be complex or can be simple. There is a method that is followed by all that use this theory.
For more from Mike Swanson get his free stock trading course at technical-analysis-charts.com.
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