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Technical Analysis

Technical analysis is not an exact science; it is more of an art and takes a considerable amount of experience. Not all studies work the same for every instrument traded. One study may give excellent buy and sell signals while another may not work for you at all. It's up to each individual trader to find those that will fit his or her specific needs.

The professional investor that looks at the same stocks and only buys when there is a SALE going on. So when everyone has given up and sold, he is buying. After a month or two the stock generally rebounds and Wall Street loves the stock again, then analysts hop on board and upgrade the stock to a strong buy, raising estimates and new fools come in and buy the stock at the all time high. The professional investor then dumps his stock and looks to find the next stock that is still at a bargain price.

Every technical analyst knows the importance of charts and indicators. But if these were all it took to make profitable trading decisions, everyone would be a winner. With most indicators it is possible to detect buy and sell levels, but the sport is to detect them before everybody else.

Technical analysts identify price trends in stock markets and attempt to predict patterns. Technicians use various methods, tools and indicators, price and volume charts. Many technical analysts also follow investor psychology (stock market sentiment indicators).

Technicians tempt to forecast price future trend in order to build trading system where gains from successful trades exceed losing trades, delivering positive profit in the long run.

There are several popular schools of technical analysis. For example: Dow Theory, candlestick charting, and Elliott wave theory. However, majority of the traders use a combination of schools. Technical analysts study to decide which particular instrument reflects current and possible future trend.

Technical analysis is frequently compared to fundamental analysts; the fundamental analysis is the study of economic factors that can influence stock and markets trends. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.

"The trend is your friend" is the motto of technical analysis.