Learning To Use Technical Analysis With Stock Trading

Technical Analysis Handbook

Technical analysis in stock trading can be described as the study or use of technical indicators in an attempt to forecast future price movements in the stock being analyzed.

Technical Indicators are merely representations of several price points on stock charts based on pre-set formulas.

In addition to using some of the indicators listed below, you can also add "Trend Lines" on the charts. Trend Lines connect two or more high or low price points to form a line. You can find some examples of using Trend Lines here:

Trend Lines form support and resistance levels on a stock chart. These can be used as additional confirmation that a trend is still in place, or has been broken and started to reverse causing a "Breakout" to occur.

You can find an example of identifying a potential Breakout using trend lines as it actually occurred here: Read More.

When performing Technical Analysis, charts are used with technical indicators added to the charts to look for patterns that have occurred in the past under certain conditions. Once the patterns are recognized, the Analyst or Trader then looks for the same or similar conditions that occurred in the past to happen again.

When these conditions are noted again, you can use the past studies to make a trading decision with increased probabilities of success because it has happened before.

Read our other article here to learn about how to forecast markets using Technical Analysis with a chart and example.

While there are many technical indicators and techinques that can be used, here is a list of some of the most common:

Most Technical Indicators are shown separate from the stock chart, either below or above it. This is because they often use a different scale than the price of the stock itself.

You will also find some of the indicators shown on the chart itself, such as Bollinger Bands. When shown on the actual chart, they are sometimes called "overlays".

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You can use Technical Analysis alone, or combine this with other types of analysis such as Fundamental Analysis or Quantitative Analysis to make trading decisions.

Some traders often use one type of analysis to make their trading decisions as they get so used to relying on what they have studied.






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