How does technical analysis work in share trading?

Question

I am always excited to see analysts telling on TV shows what the next target price of a particular share will be...based on the past performance chart of that particular share...but i feel that chart is made of past performance and share will move on the basis of news that will affect its future...it is quite possible that a chart has been performing for past many years but suddenly some news which is not favourable flashes so no matter how good pasd record is, I feel that share price is bound to fall...what do u say?

Answer 1

For example:

I used to be a fundamental investor. Then I found out about Technical analysis.

I liked Technical Analysis for over 15 years, and now I am a Technofundamental investor.

I will screen stocks, find the best in 'my definition' and then I will purchase them only when the Technical Analysis tells me to buy, or when it tells me to sell.

Fundamentals tell you "What to Buy and Sell"

Technicals tell you "When to Buy and Sell"

The above advice is something that is worth $100K. Seriously.

Good luck.

KKP

Answer 2

The only way to be successful with technical analysis is experience. If you are afraid that a stock is bound to fall, firstly, you need to always have a stategy/plan to exit, cut the losses very short, and secondly there are indicators such as the divergence of MACD & Stochastics that can tell you a stock is about to change direction, again you have to be experienced at seeing these things on the chart.

A stock's direction is predictable and there are a lot of day traders that do this for a living and have lavish lifestyles. Just like any business, you need to learn how to make huge profits on your good trades and cut costs by cutting your losses sharply. You have to become an excellent money manager.

Answer 3

Some people swear by technical analysis. Other's don't. Many people combine them. I prefer fundamental analysis. The company is worth what it's assets are worth and they are the best predictor in my opinnion. Some people belive that when two lines cross at certain angles using some indicator, that the stock will go up, down or trend sideways.

But I am a long term investor and don't particurily care about the day to day ups and downs (though the downs make more buying opportunities).

Answer 4

Hi there,
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I definitely recommend subscribing to this site in particular. Very good research, quality stocks. I was a bit weary of penny stocks from all the bad hype they receive but this guy is pretty legit. He's put my mind at ease with a lot of the fears I've had. I especially like that he doesn't send out announcements left and right. I've signed up for other websites that fill my in-box with one company after the other. I don't know where to even start with so many choices in front of me! Nathan sends me one idea a week and that's all I need. Working so many hours during the week leaves me with very little time when I get home to start doing tons of penny stock research. I'm always eager to see what Nathan's next suggestion is each Friday and I love having time on the weekend to do my research.

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Good Bye

Answer 5

Despite the opinions of detractors on either side of issue, it's important to understand the functions of technical and fundamental analysis. Technical analysis measures past behaviour on the presumption that that is repetitive, cyclical and therefore predictable. Fundamental analysis is restricted to the underlying factors affecting prices such as weather, GDP, crop size, policy or PPI, for example.

While purists may tout the advantages of favouring one type exclusively over the other, realize that trading behaviour relies on fundamental factors. A case in point is the recent jump in corn prices following a half-a-billion-bushel shortfall in the crop report along with an increase in ethanol production. Prior to this change in fundamental data, technical indicators signaled a bear market, where the question asked was whether the longs could really sustain these high corn prices. A smaller crop and higher by-product demand has created a completely different fundamental picture, and the technical analyst must take this into consideration to adjust his interpretation of chart signals.

You may be excited by recommendations that indicate profitable opportunities, but your eagerness should be tempered by an emotionless assessment of the risk associated with the positions you're considering. Be sure to take recommendations with a grain of salt, and prepare yourself for the adverse price changes that are an inevitable part of trading by managing your positions with hedging strategies and stop-loss rules. Utilize technical analysis, but be aware of fundamental changes in the market that can have significant effects on technical signals.

Feel free to e-mail me with any questions on money management, risk management and technical or fundamental analysis.

Answer 6

Many people have made loads of money using technical analysis in the market. Its probably a good idea to get a book on it and read it to understand what it is all about.

Answer 7

hi tech. analysis is must for all before doing ttrade as it give u the view that how the share was in it's past and it will help in to take decision's as how to track the share to buy for a day or hold it or not to buy .
actually it will guide to make a clear picture of it's mkt. movement and to apply it to current scenario.

Answer 8

It doesn't.

There is a reason why technical analysis is not taught in business schools. It is -- quite simply -- voodoo.

Flipping a coin will give you a better result.

Answer 9

chart reflects trading ie it shows trading of people
who gets/hints the news & it forms a pattern
thus even if we dont know the news
we can catch impact on chart &
catch the turning point

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