When we enter into the realm of the Indian Stock Market, one of the first terms we come to terms with is “Technical Analysis”.
Not only is it globally incorporated as a trading strategy most traders swear by, it is regarded as a near-accurate analysis when it comes to market numbers.
For beginners, it might be overwhelming to understand where to begin when it comes to Technical Analysis as the internet is full of information on how it works.
This article gives you a quick insight into “Technical Analysis” – the terminology.
So, let’s begin by breaking down the term bit by bit.
By definition, Technical Analysis provides the overview of financial stock price movements which may happen in the future, based on the study of previous past price movements.
It is believed that Charles Dow, the father of Dow Theory in Trading, initiated the study of stock charts by following past trends in the market.
His Dow Theory talks about technical analysis as well.
The general theory among technical analysts who are also known as “chartists” or “technicians,” is that future price movements in a stock can be predicted from a study of previous prices and volume data.
These predictions may not always be precise but they would help traders understand which way the stock prices might move.
This anticipatory power would help the traders know where to invest and when to sell or buy a stock.
To begin with, Technical Analysis is a simple theory, if not complicated by unnecessary add-on measures.
Unlike Fundamental Analysis, Technical analysis does not take into account an organization’s value but focuses on the movement of its price as a result of supply and demand.
In the stock market, supply and demand is highly influenced by emotions of fear and greed and traders hope to work both to their advantage.
Technical Trading and Technical Analysis are terminologies which often overlap, during the understanding of stock market trading.
Technical Analysis can predict both short-term and long-term trends.
So, we see how understanding the benefits and limitations of technical analysis helps us identify a new set of trading skills that will make you a more successful stock trader.
We are well aware that all traders wish to make the most of their trading skills.
When one invests in a stock or a ‘tradable’ commodity, they are aware of the risks they might have to undertake.
Trading is thus, not just an investment of money but also an investment of precious time and mental wealth.
Technical Trading is well acceptable due to its versatile nature.
Its rules are universally applicable and this makes it a simpler method to work with trading.
Overall, we see how trading is a rapidly growing field and it requires for the trader to be aware of the share prices before being completely indulgent in the stock market game.
When you are not certain of market position, always make small commitments.
There are exceptions to every rule prescribed by traders but it is important for us to remember to look beyond the emotions and invest in what we believe could work out well for us.
So, one must make trading an emotionally as well as financially rewarding experience where each day a new trick is learnt!
Since, Technical Analysis is a vast area of study, we have an article coming up exclusively detailed just on the effects of Support and Resistance in Technical Analysis.
Read more here: http://stockmarketsignals.com/Fundamentals-of-Technical-Analysis