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Stock Market Technical Analysis Tool – How is it Useful for Traders?

Depending on the fundamental analysis, we can determine whether a stock is attractively priced, fairly priced or whether it is overpriced. This would be helpful to make decision whether to buy or sell based on that determination. Fundamental analysis is more qualitative analysis of the company and its stock price

Author: Kathy Green
Date: Dec 22, 2010 - 8:17:19 AM

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Most of the technical analysts these days use the latest tools such as stock market technical analysis software to perform investment technical analysis or charting as commonly said by traders. These trading tools are quite useful in providing good information on momentum, direction, historical relevance and other helpful information that can aid into making a stock trading decision. For the fresh investors or new traders it is quite important to note what is meant by technical analysis, how it is useful in investment research and how it is different from fundamental analysis, which is another common method of stock analysis.    

Fundamental analysis as the name suggests is related to the fundamentals of the company that is questionable. The analysis is based on the company revenues, earnings, stock price in relation to its earnings, the company’s financial and management stability, its market value, its market capitalization and other such basics and fundamental data that relate to the company and many also to the industry that the company is related to.  

Depending on the fundamental analysis, we can determine whether a stock is attractively priced, fairly priced or whether it is overpriced. This would be helpful to make decision whether to buy or sell based on that determination. Fundamental analysis is more qualitative analysis of the company and its stock price. Moreover long-term investors perform fundamental analysis and make their investment decisions based on the outcome of the fundamental analysis. The drawback of the fundamental analysis is that it gives priority only to company numbers and does not look at the other quantitative aspects such as accumulation, price movement, short and long positions, stock price historical performance and other such related data. That is where stock market technical analysis comes in.
    
Online technical analysis performed by stock market trading system uses to plot the historical stock price movement in relation to time. The most basic version displays the charts from a stock ticker’s main menu. Depending on the level of chart used, one can compare this basic chart with a number of other significant and relevant information that can help you to distinguish whether the bulls or the bears are in charge. It implies that whether the stock market price is trending downwards or upwards due to bear or bull’s activity respectively. The moving averages, the trading volume information, the periodic lows and highs, the resistance and support levels and many other related and vital factors help a technical analyst to make a reliable prediction on which direction and how quickly the stock rates are likely to move in the near period. Thus, this type of analysis is more useful for short-term and guides investors who typically want to get in and out of the market quickly. The important point is that the technical analysis does not consider the quality or fundamentals of the company at all. It is not at all concerned with the company’s performance and financial numbers.

Thus, traders or investors who are doing online investment research for investments can carry on investment technical analysis for making trading decision looking at these charts.

View all articles by Kathy Green

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