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Technical Analysis Is a Key to Trading Success

Guest post by: Gary Kerkow

Article Overview: Once you acquire the skill of technical analysis, a whole new world will open up for you. This new world has the potential to make you very wealthy. Learn about it in this article.

Technical Analysis Is a Key to Trading Success

What is technical analysis?



It is a method of evaluating stocks, commodities, and other securities by analyzing statistics generated by market activity. Examples of activity are past prices, and volume. Charts and other tools are used to identify patterns that can help predict future activity. This is essential to trading success.

Efficient market theory is a fraud



Many from academia believe in the efficient market theory. It states that the stock market, commodities market, and other trading venues, are for the most part, unpredictable. This is simply not true. When a trader implements proper technical analysis, they have an enormous advantage over someone who does not. Analyzing a chart is synonymous with trading success.

Supply and demand causes the price to move



When the demand for a stock, also known as orders to buy, is greater than the supply, also known as orders to sell, the price will go up. On the other hand, if supply exceeds demand, the price will go down. Charts provide a record of supply and demand. When a stock or commodity goes up in price on heavy volume, this tells us there is a lot of demand.

Chart reading is a valuable tool



The purpose of chart reading or technical analysis is to determine the probable strength of demand, versus the pressure of supply at various price levels. This helps the technician predict the probable direction a stock or commodity will move. Once a trader becomes proficient analyzing price and volume action on a chart, their odds of trading success increase dramatically. This is a main reason why the same traders make money year after year. It proves the efficient market theory is wrong.

Price and volume provide excellent clues



The history of a stock's price movement and volume, as recorded on a chart, provide clues that can lead to a literal fortune. In the marketplace, history repeats itself quite often. Price movements tend to repeat with great consistency. This is due to human nature, which never changes. Nearly all of the world's best traders and investors are highly skilled, when it comes to pattern recognition on a chart. Technical analysis is a key component to overall trading success.

Follow the trend for trading success



Nothing is more important in technical analysis than the ability to properly interpret the trend. Prices have a tendency to move in a certain direction for a considerable amount of time. This trend, or movement of prices, frequently assumes a definite pattern. The skill of recognizing key patterns on a chart, significantly improves your chances of making huge sums of money in the various trading venues. Trading success can by yours, if you are willing to put in the time and effort.

In summary



Nearly all successful traders and investors use some form of technical analysis to help them formulate their trading strategies. There are identifiable price patterns on a chart. They can give you clear indications when there is a better chance of one thing happening over another. All trading is based on probabilities, and you always want an edge to put the odds in your favor.

Technical analysis is far superior for projecting future price movement, than a purely fundamental approach. Once you acquire the skill of technical analysis, a whole new world will open up for you. This new world has the potential to make you very wealthy. Trading success can be yours.

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Article Tags: technical analysis, trading, trading success



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