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Monday, January 25, 2010

Technical Analysis Defined

By Michael Swanson

If you want a definition of technical analysis think of patterns that forecast market by the direction and study of earlier market performances. It mainly keeps track of volume and prices. This done by watching what happens in various markets for long period of time.

Modern technical analysis was inspired by the development of the Dow Theory near the end of the 19th century. Watching particular items on the market is how this works. After a while one will notice a pattern in price.

When the pattern has been figured out then it can be exploited to achieve for cash flow. The more that is understood about the product and a market the more money that can be made. Traders and financial people are the ones that mainly use this method.

Analysts think that the past stock market trends will give way to the future trends that can be followed and used. By watching the past is should yield what the future will do so decisions can be developed.

Using different markets and the theory one could predict the fall and then subsequent rise of the market. However, this is not set in stone therefore most times investors use it as a guide to assist them.

The people that use this method develop charts to help them determine the long and short term information. If the charts are used properly they will help put together a view of what has happened and what is too come.

Classes, books and other teaching methods are provided by experts for those that want to learn how to excel in this method. The set back to this method is that the information gathered is not always reliable and can get a person in trouble. There is some complex information and simple information that can be gathered. - 23212

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