Carrying out stock price prediction is the mainstay of technical analysis; it is a discipline deployed to assess investments and spotting trading prospects by studying the trends in trading activities, including price movement and volume. A technical analyst focuses on important factors such as price movements, trading signs, and other analytical charting tools so as to analyze a security’s strength. He or she uses charts in graphic form while executing this financial market action. Changes in the price for a certain period are recorded and represented in the graphic form referred to as charts. Hence, technical analysis is also called a chart analysis.
Identification of the Pattern of Fluctuations
Technical analysts, who are also traders sometimes, to the best of their knowledge, suggest that the marketplace is cyclic naturally, and the price movements and stock prices can be forecasted by perceiving the habitual trends; identifying the patterns is not as easy as ABC. However, once you gain a good experience in stock and master it, you will be able to predict future movements of stock prices more accurately. The main object of chart analysis is to forecast the market price, using past market data.
Helps Take Efficient Decisions
Because most of the traders buy and sell stocks on the same day, it is important for them to make swift decisions on the buying and selling them. Nevertheless, doing the fundamental analysis for such an incredibly short time is near to impossible. In such cases, technical analysis can come to your rescue; it can give you an idea about the direction of the stock price. There are so many automated tools available at hand that can extract technical information, based on your preferences. However, this technique is based on a number of suppositions, emphasizing on the price movements, ignoring other aspects. That is the reason you can’t always accurately predict the price movements. Notwithstanding, a number of traders use technical analysis as it helps in identifying the pattern of fluctuations and decision making.
You should keep in mind: “Be fearful when others are greedy and be greedy when others are fearful,” a saying by Warren Buffet.