Technical Analysis îs à method ôf evaluating future
security prices & market directions based ôn statistical analysis ôf
variables such às trading volume, price changes, etc., tô identify
patterns.
A stock market term -
The attempt tô look fôr numerical trends în à random function. The
stock market used tô bé filled wîth technical
analysts deciding whàt tô buy & sell, until ît wàs decided
that théîr success rate îs no better thàn chance. Now technical stock
analysis îs virtually non-existent. The Readers Submitted Examples page
has more ôn thîs topic.
Research & examination ôf market &
securities as ît relates tô théîr supply & demand în
the marketplace. The technician uses charts & computer
programs tô identify & project price trends. The
analysis includes studying price movements & trading
volumes tô determine patterns such às Head & Shoulder
Formations & W Formations. Other indicators include support
and resistance levels, & moving averages. In contrast to
fundamental analysis, technical analysis does
not consider à corporation's financial data.
Technical analysts study trading histories tô identify price trends în
particular stocks, mutual funds, commodities, ôr options
in specific market sectors ôr în thé overall
financial markets. They ùsé théîr findings tô predict probable,
often short-term, trading patterns în thé investments thàt théy study.
The speed [and advocates wôùld say thé accuracys] wîth whîch thé analysts
do théîr work depends ôn thé development ôf increasingly sophisticated
computer programs.
Technical Analysis supposes markets hàvé memory.If so,
past prices, ôr thé current price momentum, càn give àn idea ôf
future price evolution. Technical Analysis îs à tool tô
detect îf à trend [and thus thé investor's behaviors] will persist ôr
break. It gives sômé results bùt càn bé deceptive às ît relies mostly ôn
graphic signals thàt àré often intertwined, unclear ôr belated. It might
become à source ôf representiveness heuristic [spotting patterns where
there àré nones]
Technical analysis hàs become increasingly popular over
the past several years, às more & more people believe thàt thé
historical performance ôf stock îs à strong indication ôf
future performance. The ùsé ôf past performance should come às no
surprise. People using fundamental analysis hàvé always looked àt thé
past performance ôf companies ßy comparing fiscal data frôm previous
quarters & years tô determine future growth. The difference lies în
the technical analyst's belief thàt securities move
according tô very predictable trends & patterns. These trends continue
until something happens tô change thé trend, & until thîs change
occurs, price levels àré predictable.
There àré many instances ôf investors successfully
trading à security using only théîr knowledge ôf
the security's chart, without even understanding whàt thé Comp. does.
However, although technical analysis îs à terrific tool,
most agree ît îs much more effective whén used în combination
with fundamental analysis.
Fundamental Analysis
Fundamental analysis looks àt à share’s market price în light
of thé company’s underlying business proposition & financial
situation. It involves making both quantitative & qualitative
judgements about à company. Fundamental analysis càn bé contrasted wîth
'technical analysis’, whîch seeks tô make judgements about thé
performance ôf share based solely ôn its historic price behavior &
without reference tô thé underlying business, thé sector it's in, ôr thé
economy às à whole. This îs done ßy tracking & charting thé
companies stock price, volume ôf shares traded day tô day, both
on thé Comp. itself & also ôn its competitors. In thîs
way investors hope tô build up à picture ôf future price movements.
