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.

Once the price pattern has been established one can then exploit that pattern to earn more money. Understanding and using the information will result in an increase in revenue. This is used mainly with traders and financial professional.

The stock market items from the past will tell us what the future is going to do. People follow this to learn what they need so they can decided what to buy and sell. This is a good method to use for most people.

If person were to use this theory and it worked they would be able to predict the rise and fall of items on the stock market. This is not an absolute prediction; it is mainly used to assist investors in what will likely happen.

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.

There are experts on this theory, books and classes to teach people this way of investment. However some people think that this theory is not sound enough to use on a regular basis. The approach that is used is called a top-down approach. The information that is gathered can be complex or can be simple. There is a method that is followed by all that use this theory. - 31970

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