“The trend is your friend.”
What Is Technical Analysis
Technical analysis is a method of analyzing a security or stock potential by the market activity, most of the time through a series of chart and indicator. Technical analyst use information like prices and volume to evaluate securities rather than looking at its intrinsic value.
Technical analysis analyze public psychology, it sees how the crowd reacted upon a security and predict the future direction from this. A pure technical analyst has no interest to the fundamental side of a share. The doubt of: what industry it’s in? What is the primary product? How’s the quality of its management? Or how’s the financial strength? These questions are not the primary concern for a technical analyst.
The technical analysis is use for short or very short term of trading, swing traders and intra-day traders will be the one uses technical analysis in their trading activity.
Why Use Technical Analysis
A stock trades based on the future, not the past, often good news is released at the top and a bad news is released at the bottom, this shows that we will be late if we based on the public information to trade. Technical analysis, by this mean, can provide an early signal for the market movement in order for early decision.
Technical analysis helps you in determine the proper timing for buy and sell and get a sentiment insight of the market sentiment.
The benefit of Technical Analysis:
Analyze the public insight
Stock market is the game of human, so how can we neglect the response of human throughout a fundamental factor? Technical analysis provides an outlook for the public respond upon the fundamental of a stock.
A solid reason to trade
Technical analysis provide you with reasons and confident to trade a certain share, with more information on public sentiment and psychology, traders can monitor their trade through technical analysis by using stop loss order, this efficiently protect profits and limit loss.
Reflects the market trend in short term
Company fundamental value will reflect at the stock price for the long run, it can have times of little ups and downs within the large trend, and each of the ups and downs is an opportunity to profit. Technical analysis is what we need to profit in the little market movements.
Simplify market information
We have a bundle of information coming to us every day, for every counter, some of the news do creates big public concern but most do not, technical analysis eliminate the unused information. You may not know if is it good or bad to the market balance when a piece of news is released but the market will reflect everything relevant to it.
Get rid of emotion
Trade with emotion is harmful, traders can eliminate most of the emotion by trade according to the technical method, react base on the public reaction rather than the fear and greed feeling inside heart.
Predict these doubt by technical analysis:
1. When should I buy/ sell the stock?
2. When the trend is going to reverse?
3. Is that the right price to accumulate that stock?