WHY TECHNICAL ANALYSIS?

Technical analysis is a commonly used term in the stock market and investors and experts are spending sleepless nights over it. Technical analysis of the stock is a method of predicting the stock price. There are different models or methods of doing the technical analysis like the Candle Stick Charting, Dow Theory, Elliott wave principle and so on. Thetechnical analysis is done on the basis of some data that are related to that particular stock. While doing the technical analysis, experts consider the past market, market trends, price of the stock and trading volume. Based on these data analysts perform the stock analysis to predict the price of that particular stock.

Through the stock analysis experts actually try to figure out the movement of a particular stock at the stock market. This is done by preparing charts on the basis of different indicators such as relative strength index, regressions, moving averages, cycles regressions, inter-market and intra-market price correlations. Once the chart or the pattern is formed according to the formula of the technical analysis experts figure out the similarity of the pattern with previous stock movements. When the pattern matches with a previous case, it is predicted that the stock will follow that pattern.

Technical analysis of the stock has given a mathematical and scientific explanation of the stock movements. This is a partially logical way of predicting the price of the stock and hence technical analysis is seriously considered by the experts and the investors in general. But in reality technical analysis is not the absolutely surefire way of predicting the price movement of the stock. Simply because there are so many other factors that influence the price of the stock other than those taken into consideration while doing the technical analysis. For example no technical analysis theory considers the psyche of the investors and panic in the market that hugely influences the stock prices.These factors are only considered by professionals in the market who understand market and are well versed with technical analysis too.