Actually, I still remember that when I just started on options trading. I don’t even hear of those advanced technical analysis until I got a chance to invest on futures option trading. In realistic, most of the new traders never do their technical analysis at all, just keeping in mind that they should buy low and selling high. But the question is that do you really know when the point the lowest price is is? You will never know if you didn’t do detail technical analysis on it.
Basically, there are 2 ways to analyze a stock:-
1) Fundamental analysis – This is carried out by [tag-tec]analyzing a company’s portfolio[/tag-tec]. Criteria that take in to account in the analysis include the company’s financial condition, profitable and their products demand in the markets. This is tending to project general analysis of the company.
2) Technical analysis – This is more advanced method of analyzing the potential performance of the company. It involves utilizing weekly and daily chart and trading volumes. As opening price, the daily range and the closing price of every stock will be showed in every single price chart. Furthermore, it’s also to forecast the future movement of the particular stock price. However, some of the technical analysis can be applied on the [tag-tec]fundamental analysis [/tag-tec]as well in order to pin-point an exact enter and the exit point.
However, the analysis methods will be depend on the investment strategies as well, since the investment time periods vary from the day (day trading), to short term, to intermediate, to long term. Short term means days to weeks, intermediate imply weeks to months, and long term may more than few months to years.
Most of the technical investors may invest the stock based on the trend lines which is normally also rely on the time horizon. They are trying to determine 2 tend on analysis process. The 1st one is the "uptrend" which involves a series of higher highs and higher lows. And the 2nd trend is "downtrend” which is involve with a series of lower highs and lower lows.
Support and resistance are the important criteria in stock analysis too. Support is an area of before purchases which acts as sources of demand for the stock in the falling stage. Resistance is an overhead source of supply of stock to sell triggered by an area of prior purchases. Most of the inexperienced traders will not sell their under-performing stock. Normally, they will keep waiting for the time when the price return to their entry level and sell them off at break-even point.
In conclusion, to study on the technical analysis, the Trends, Moving Averages, Support and Resistance levels are the powerful technical indicators to develop your own trading system.
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