When it comes to trading many investors and traders use fundamental analysis and others use technical analysis. Everyone has a different approach and they all continue to debate over it. Fundamental analysis focuses on factors like revenue, valuation, and industry trends whereas technical analysis focus on market price, volume, and historical data to make the predictions.
If you are a beginner in trading, you should start by gaining fundamental knowledge and then move towards technical analysis. It is the key to become a successful trader. Analysis in itself is a pretty broad term. There are many ways to ensure if the investment is good or bad and to make accurate predictions but technical analysis is one of the best methods.
What is Technical Analysis?
Technical analysis is a method of predicting and examining the stock value based on their previous price movements, trends, patterns, trading volume, charts, and other factors. Technical analysis focuses on trading signals and studies of charts and graphs, support and resistance, demand and supply, candlestick patterns, and psychology.
technical analysis is a study of current and past scenarios. Unlike fundamental analysis, it has a more practical approach as it leverages the behavior pattern of the market and the trading psychology of the human mind. Technical analysis helps the traders and investors to study the gap between the intrinsic value and market price by using the statistical method.
Technical analysis keeps human emotions at bay and gives you more clarity about the current situation of the market without getting overwhelmed with knowledge and emotions. It is a clearer strategy to make future price predictions as you are only picking the trade signals as depicted by the data and statistics and by not becoming the sheep who follows the herd.
If you are a beginner in trading, you should focus on both fundamental and technical analysis but also needs to understand why one can use technical analysis as a window of opportunity to make profits. Technical analysis is not just a method for short-term predictions but long-term as well. Technical analysis is one of the effective techniques to make predictions on Intraday, Swing, and Positional trading.
The stock market is one of the most competitive areas and getting returns on the investments is a quite tricky task as there are more than one-two factor that needs to analyze to make accurate predictions and only technical analysis is the tool that can evaluate and consider all factors at once to make the most accurate predictions.
2 Approaches of Technical Analysis
Technical analysis is widely used by equity traders, Forex traders, and commodity traders all over the world. Mainly because technical analysis has increased the profit ratio and return on Investments.
Fundamental analysis is necessary to find financially sound stocks and technical analysis is essential to make future price predictions. If one wants to succeed in trading and to generate revenues one must use a technical analysis approach.
The technical analysis has 2 general approaches to make the analysis. The top-Down approach and Bottom-up approach. The top-down approach is used by short-term traders whereas the Bottom-up approach is taken by long-term investors.
The top-down approach focuses on the overall economy instead of focusing on individual aspects. It simply means, instead of directly focusing on companies and stocks individually one has to pay attention to the whole economy first then sectors, and then companies or stocks.
This approach is also known as macroeconomic analysis. This approach will help you to make short-term profits. The top-down approach has a 50-day moving average as a buy-in opportunity to make instant profits.
As opposed to a top-down approach, the bottom-up approach is based on microeconomics. This approach is used by long-term investors to make decisions regarding investments in financially sound companies and stocks.
The bottom-up approach mainly focuses on individual aspects and not on the overall economy. The bottom-up approach tells an investor about the entry and exit points of the stocks. The bottom-up approach of technical analysis tells the trader about the specific entry points to make significant gains in the long term.
Advantages Of Technical Analysis
There is more than one reason why equity traders use the tools of technical analysis to make future price predictions and know the precise entry and exit points of stocks. Technical analysis is all bout clear timing to make the maximum profit possible in the given time.
Here are few more advantages of learning technical analysis that will help you to trade well.
- Clarity- technical analysis is based on market statistics of past and present. Therefore, with the help of charts and graphs, one can easily get a clear picture of the market action and economy. They can study the pattern just with one look and make decisions with a clear mind.
- Objectivity-the objective of the technical analysis is the same as to any trader or investor “analyzing the price structure and volume”. unlike fundamental analysis that only shows the financial state of the company or stocks. Trading signals of technical analysis help make the future market price prediction.
- Patterns-Technical analysis is the only tool that can help any trader or investor to recognize the market pattern and human behavior to make market price and volume decisions. With help of charts and graphs, any trader can analyze all the trade signals and patterns with just one look.
- Inexpensive- if you are thinking that the study of market pattern, behavior, and history analysis would be expensive then you are wrong. Now, you can get a free or relatively inexpensive computer and mobile software but you surely would have to study first to know how this software works.
Education Is Must
Now you know exactly what technical analysis is how it’s different from fundamental analysis, its scope, and its benefits. Now, the question arises how you will learn technical analysis and from where?
There are many traders turn teachers who teach you about trading or you can take online classes or watch several Youtubers talk about how technical analysis helps to trade well. But the fact remains after watching several of those videos you still won’t find when and where to act and how to predict the patterns accurately.
For that, you will need the help of an industry expert and learn from knowledge and experience. This can only be achieved if you visit our website and learn from the most charismatic speaker with experience in trading and teaching technical analysis strategy via their online courses offered by Mr. Umesh Sharma.
He has more than 20 years of experience in the same field and now spreading his knowledge and experience in form of professional trading courses to learn technical analysis with their practical application.
They offer 3 courses that can give you a deep knowledge to know about every aspect and sector of the economy, evaluating market price and volume, study patterns, behaviors, and psychology. These 3 courses are following:
- Online Technical Analysis
- Option strategy
- Combo of both (Technical analysis + Option Strategy)
These courses will not just provide you theoretical knowledge but practical as well which will help the beginners to lower their risk. You will start with paper trading first which will help you to study the charts and patterns and make predictions without losing any money. Once you start making accurate predictions then you can step into the real market under the supervision to gain some confidence.