So you’ve entered into the world of investment and stock trade, and you want to know how to succeed in this endeavor. You may have tried going at it by pure instinct, but chances are you’ve lost just as much as you’ve won. Worse, you may have lost even more than you’ve won, and your trading capital is at a decline. You wonder, how do other people become wealthy doing this? Are they just purely lucky? Is it all a big deception? Or is there a secret to their success? Enter the stock market technical analysis.
Stock market analysis is generally done in two ways: fundamental stock market analysis and technical stock market analysis. Fundamental analysis aims to determine a stock’s inherent value through a comprehensive list of considerations, while technical analysis only considers a stock’s price and volume. For this article, we’ll be focusing on the latter.
Fundamental stock market analysis is a method of analysis that was first introduced in the 1800s by Charles Dow, founder of the Wall Street Journal. What sets it apart is its dependency on trends to determine stock value. It has been successfully applied by numerous investors who have been accomplished in their trade.
Whilst upholders of fundamental analysis may argue that technical analysis is too shallow and therefore unreliable, let us take a closer look at how and why stock market technical analysis should work:
Despite having all those advantages mentioned above, and as with anything else in trade and life, technical analysis has its own set of limitations. Here are some of its most prominent setbacks:
So, does stock market technical analysis work?
Hardcore fundamentalists would say that it does not, just as hardcore technicalists swear by it. Objectively speaking, technical analysis does have its merits and strengths, which is why many traders do just fine while using it. The critical point is not being blind to its limitations and not relying entirely on it as there are plenty of other factors you should take into consideration when making your next move in the trade.
At the end of the day, your discipline and sound judgment in trading, along with a methodical and objective approach using the right analyses, is what will ensure that your investments succeed. Technical analysis is simply one of a full arsenal of practical tools you can employ in this business. But does it work? Most of the time, with the right mindset and a sensible approach, it does.
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