Online Investing Hacks

Hacks #46-53

In the stock market, techniacl analysis, known affectionately as TA, represents the study of the behavior of price and, in many cases, trading volume of stocks or other investments. This approach contrasts with fundamental analysis, which is described in Chapter 4, in which investors for the most part ignore price and instead determine the fair or intrinsic value of a share of stock by evaluating the company’s basic financial metrics. Technicians, also known as technical analysts, believe that price movement reflects all that is important to know about a stock or tradable investment. Ignoring the fundamental factors that may have fueled a rise or decline in price or might do so in the future, technicians concentrate on changes in supply and demand as reflected in price movement, often using volume to test and verify the genuineness of a move, and make all trading or investing decisions on such price movements and volume flow.

To technical analysts, stock prices tend to follow trends and, like a physical object in motion, exhibit a tendency to continue moving in an established direction. Technicians attempt to exploit these tendencies to make money trading investments. Of course, trends do stop, change direction, or drift sideways (what is called a trendless market), but technicians can see and often anticipate such changes through signals that appear in technical charts or are generated by technical analysis tools.

Because trends can change, the most important key to ...