How to do Technical Analysis | Technical Analysis Explained

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Technical Analysis- Explained

Technical Analysis:

It's the Analysis that is done only on the base of three things which are Charts, Price Action, and Trend. It doesn't include the fundamentals of the stock or indices. It just depends on the future aspects of the stocks or Indices.

Technical Analysis VS Fundamental Analysis:

Technical Analysis gives a prediction about the future prices of the Stocks or Indices, while in fundamental analysis we study the historical instances which are occurred in the past such as Quarterly results, Internal or External Issues, Dividends, et cetera.

In the market, the opinion which matters is the prediction of the future. Nobody cares about what was done in the past, And technical analysis gives the exact idea of what will happen in the future?

So anybody who has good experience in the market will understand how important role is played by Technical analysis in the Stock market. On the contrary Fundamental Analysis has some limitations, you cannot do fundamental analysis on Crypto-currencies like Bitcoin in that case, you are left with the only option of using Technical analysis.

Technical analysis is important because even if you study Fundamental analysis of a particular stock you will get the information about the past news occurred in the stock and Sir John Murphy says, "The current price of the stock has every bad and good news compressed into the price" therefore he is saying that fundamental analysis can never be used for predicting the future price.

Technical Analysis

Technical Analysis for Long-Term:

People say that technical analysis is only useful in the short-term and is of no-use in the long-term perspective. So for them John Murphy has given a statement in his book that Technical analysis is helpful in Long-term by showing the correct trend, buy point and sell point. You can use technical analysis of charts which are set in 3 Months view, 6 Months view, 1 Year view, of 10 Year view as per your requirement.

I hope that you have understood the importance of Technical analysis in Stock Market.

We also divide Technical Analysts into the following categories:

1. Chartists
2. Technical Analysts
3. Statistic Analysts

Although they are the same if we consider it broadly, but in high quality works people are hired by the qualification that they are chartists, statistic analysts, or technical analysts.

"Technical Analysis is an art which many people ignore in the Financial markets"

~John Murphy