The Importance of Stock Market Analysis


Getting accurate stock market analysis is extremely important if you want to be able to forecast which way the market is going to move. To do this, you need to have technical analysis that looks at price movements and trends. This is mainly done by looking at price charts and performing a chart analysis. There are many ways to get technical analysis such as candlestick charting, the Elliot wave theory, or the Dow Theory. The differences between fundamental analysis and technical analysis is that the former looks at the facts of the market company currency or commodity. Technical analysis looks only at price and volume information found in charts.

When it comes to stock market analysis, it is said that by looking at the history of a stock's trading activity, you will find all the relevant information you need. This is due price action repeats itself as a result of investors patterned behavior. Technical analysts believe that prices trend directionally. This could be up, down, flat or a combination of all. A series of lower highs and lower lows would be an indication of a downtrend. Using a candlestick chart is the best way to see this information. Many technical analysts use candlestick charts because they can identify trends quickly and easily when looking at the chart.

Charts can present information in many different formats. An Open-High-Low-Close chart or OHLC bar chart shows the span of the high and low prices during a particular trading time as a vertical line. The open and close prices are shown as small horizontal ticks off the vertical line. A tick to the left is the open price, and a tick to the right is the close price. A candlestick chart is similar to the OHLC chart, but uses candlestick shaped imagery. The top and bottom ends of the candle show the open and close price for the stock. Colors are used to provide further information. If the candle is black in color, it reflects the stock closed at a lower price than it opened. If a white candle is shown, it means the stock closed higher than it opened.

While using charts is common practice, it is not the only source for information that technical analysts are limited to using for stock market analysis. Looking at surveys on investor sentiment provides valuable information on whether investors are feeling bullish or bearish. With this information, they can see if a trend will continue or if a reversal will occur. A number of analysts go beyond using only technical analysis and look to combine other market information. For example, John Bollinger termed the phrase rational analysis for the intersection of fundamental and technical analysis.


Source by Aaron Livingston

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