How To Successfully Trade Using Technical Analysis
The pathway to trading stock starts with understanding the principles of how we can make money trading the stock and the main directions a stock can move.
Definitions Of Technical Analysis Being Applied
There are two very broad categories or methods of selecting financial products, fundamental analysis and technical analysis.
What is Fundamental Analysis
Fundamental analysis involves analyzing the characteristics of a company like products, earnings, dividends, etc., in order to estimate its overall value.
What is Technical Analysis
Technical analysis on the other hand, is a discipline that predicts the direction of prices through the use of charts and the study of past market data, primarily price and volume. When you review the technicals of a stock, you don’t concern yourself with the value of the company. Instead, you identify price patterns and market trends to find patterns and predict price moves that will earn you a profit.
Technical analysts are concerned about what the price is now and what is the history of price movement. They don’t look at why a price rose or fell, only that it did. The beauty of this method of trading is that principles such as support and resistance, trends, trading range and other technicals can be applied to any stock on any chart. By using this method you can stay clear of the Seven Deadly Trading Mistakes.
Limitations Of Technical Analysis
Keep in mind that it is impossible to calculate a top or a bottom on any stock. However, when a stock begins an advance it is easy to recognize that advance and capitalize on the move. The Acorn Wealth strategy is to enter the position, once the stock has started its upward move, let it reach its point of resistance, and exit with the profit generated.
Take a look at the picture below where you can see technical analysis being aplied to a chart.