Why Is Technical Analysis Needed In Stock Trading


How do you pick and choose a stock to invest your capital? If you have just started investing in stocks or have been trading for a while you may be analyzing a stock from its fundamental factors which is known as fundamental analysis. Here factors such as sale, debt, assets, market share and the overall mood in the industry the stock belongs are studies. But fundamental analysis can offer you only half the picture about the stock and this is where technical analysis becomes important.

What is Technical Analysis?

Technical analysis of stocks digs deep into the numbers. Here the past performance of the stock is used to predict its future price movement. It is scientific analysis of data that does away with all the emotions that often drive stock market prices. Here volumes, the price swings and demand-supply cycle are studied with keen interest. It is similar to clinical tests that physicians often rely on to judge a person’s health. If you have long term goals from the stock market and would wish to invest substantial portion of your wealth in the market you need to learn the art of technical analysis. It is important and here are some reasons why you need to analyze stocks technically while investing on trading in them –

Identify opportunities and risks

In the equity market majority of the stocks can offer you good returns if you can time your entry and exit to perfection. When you carry out technical analysis on a stock you’d be able to foresee the opportunities or the risks in the stock. In fact it allows you to get early alerts on your entry and exit strategy. You won’t have to depend on experts who usually come with advisories much later and cash in if there is a chance of growth or minimize your losses by exiting at the right time.

Make informed decisions

If you wish to be a serious player in stock trading you will have to learn the art of making informed decisions. While you can rely on brokers and market experts to suggest you the right entry and exit strategies they don’t always get it right. By carrying out your own technical research you will be able to assess the viability of their calls and make the right decisions with respect to your trade. This will help you make more surefooted decisions while trading.

Take technical analysis seriously if you wish to stay invested in the market for long and see your investments grow exponentially.

Summary – In this write-up we discuss the need of technical analysis with respect to stock trading and its advantages.