Understanding Stock Charts
Have you ever wondered how it is possible for traders and investors to make money on the stock market? So many people consider it a gamble these days that it can be hard to believe that it’s actually possible to buy or sell the right stock at the right time. Most successful traders these days use a method of evaluation called technical analysis, which uses the information provided in stock charts to make more informed decisions about their stock market trading.
Technical analysis is the practice of forecasting financial price movements on the stock market based on an ongoing examination of price movements as they take place over time. This practice isn’t like looking into a crystal ball of stock market futures, rather it’s more like weather forecasting, in which past performance is used to make more accurate predictions about what will happen in the future. Instead of providing absolute answers technical analysis can be used to help investors make educated assumptions about what’s “likely” to happen to the price of a certain stock over time.
In order to track stock performance and evaluate the behavior of different securities for the emergence of patterns and signals, technical analysts use a wide variety of charts and graphs that show movements in price over time.
It’s important that new investors become comfortable with the reality that prices on the stock market are going to change, sometimes rapidly. While these fluctuations can seem overwhelming and frightening at first, they are completely natural to the market, and actually represent the only opportunities for making money. If the stock market was always stagnant, there would never be a chance to buy or sell for a profit. Along with tracking price and spotting patterns, technical analysis charting should be combined with anecdotal research about a company to make sure that they are a safe place to invest your money.
While it is possible to make a lot of money in the stock market, it’s important to remember that there is always a level of risk involved, and if you don’t spend the time researching the companies you’re interested in, the level of risk can be quite high. Knowing how to best predict the way that your stocks are likely to behave in the future is a goal that is best met through technical analysis. Using technical analysis provides traders with an advantage, because it allows them to predict the future of the stock to a certain extent. When properly executed, this type of analysis enables investors to make more informed decisions about when to buy and sell their stocks, instead of just going with their gut, or listening to so-called experts that are likely to get it wrong.
