Technical analysis is the study of price action over time and charts are what an analyst works with as their primary record of price action. Behind every price is an investor who had a reason for buying or selling. Traders generally act alone but often their weight of numbers has a direct influence on short term prices.
Analysing the market with charts and technical indicators is the study of group behaviour and sentiment. It is done with science and art. We use science because we use mathematical formula, computers and statistics. The art is creating a trading model with technical indicators and money management principles that reflect the investor's personality and trading philosophy.
Charting is the study of price action of a market itself as opposed to the study of the goods in which a market deals. Technical analysis is simply a different means of endeavouring to arrive at the same investment objectives. These goals may be summarised as:
* To gauge the relative strength of buyers and sellers
* To identify preferred times to buy and sell
* To develop a theory as to how far price may reasonably be expected to move
* To formulate a risk strategy.
Such analysis is particularly useful to short term investors as it assists in timing the placement of positions and helps to optimise the deployment of capital.
Technical Analysis Principles
The analyst attempts to use market history for its predictive value to control positions and to anticipate probable price movements in the future.
Three basic premises serve as the basis of analysis:
* First, market prices follow trends. That is, the flow of prices is not merely a series of random events.
* Secondly, as a random group, participants in the marketplace have responded one specific way at a given price.
* The third principle also relates to the past. History does repeat itself, and it does so often.
Jon Lynch is Marketing Manager of the Capital Intelligence Group of companies, including HomeTrader - Australia's leading stock market education centres. We focus on teaching you how to create wealth through the share/stock market using a customised trading plan or system that is right for you, your situation and your goals. Visit our website and register for your free introductory DVD "Learn To Make Money On The Stock Market" at http://www.learnshares.com.au
ไม่มีความคิดเห็น:
แสดงความคิดเห็น