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An
Introduction to Technical Analysis
While a fundamental
approach to valuing a share involves the use of
financial and economic data, a technical analyst doesn't
look at income statements, balance sheets, company
policies, or anything fundamental about the company.
Technical analysis looks at the actual history of
trading and price in a security or index. This is
usually done in the form of a chart. The security can be
a stock, future, index, or a sector.
The technical analyst
believes that securities move in trends. And these
trends continue until something happens to change the
trend.
With trends, patterns
and levels are detectable. Sometimes the analysis is
wrong. However, in the overwhelming majority of
instances, it's extremely accurate.
The tools of the
technical analyst are indicators and systems which are
used on price charts. Moving averages, support and
resistance lines, envelopes, Bollinger bands,
momentum... are all examples of indicators. These
indicators all tell a story.
In the past, technical
analysis required powerful institutional computers and
teams of mathematicians to interpret the signals. Now
with modern software such as Paritech Charts Online,
MetaStock, OmniTrader or Hot Trader and a home computer,
the individual investor has access to the same
information as the technical analysts of the large
institutions.
Back
to "Fundamental Analysis and Technical
Analysis" Index
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