If someone were to make a chart that represented the game, using lines and graphs so that you would be able to get all the information that is important to you about the game, this would be Technical Analysis, Chart reading to get information. This chart would represent what people (the players) had done during the game. This is what charts that represent the stock market do. Market charts represent what investors have done in the past, and from this information we can plan on what they may do in the future. People tend to repeat past actions.
Technical analysis, or chart reading is easier than the name implies. There is nothing technical about it. Using charts allows you to see how traders caused a stock to get where it is, and this allows you to make money, or reduce your losses. If investors buy, you see it. If investors sell, you see it. If investors get excited, you see it. Chart information is very inportant to you when investing. With charts investing is like driving at night with the lights on, instead of driving with the lights off, not knowing what's ahead. Charts allow you to see what others are doing, and this allows you to plan your investments.
Charts allow you to see if more people are buying (which raises the stock price), or are they selling (taking profits, which lowers the price).
There are many charts used to get the stock market information needed to guide you when investing. Each chart gives you a different view of the market, and with these different views put together, you get the whole picture. Charts alone will not create wealth, but used with "Fundamentals", wealth will be created.
The charts we use at http://www.youcontrolinvesting.com/ are;
1) Moving Average Convergence Divergence (MACD) Prounced Mac Dee, The MACD is the combination of two moving averages- a fast one and a slow one- and how they interact (how they converge and diverge).
2) Slow Stochastic; Buy line crosses up, Buy. Buy line crosses down, Sell. (not hard is it?)
3) Moving Average; Moving averages are simply closing prices over a defined number of days divided by that number of days. When the price line crosses above the moving average line, buy. When the price line crosses below the moving average line, sell. (all the math is done for you)
4) Bollinger Bands; Lines plotted at two standard deviations away from a simple moving average. Aid to see volatility.
5) Volume; The number of shares or contracts traded in a security (stock), or the entire market during a given period of time.
If you're just getting started investing, or an advanced investor looking for more information to help you understand how the market moves, "Technical Analysis" is an important part of trading. At http://www.youcontrolinvesting.com/ you will learn how to pick stocks that are worth your money as an investment, this is called "Fundamentals". When you decide that you are ready to invest in a stock, now you look at "Technical Analysis" to guide you on your entry (buy), and exit (sell) point. In between buying and selling, Technical Analysis allows you to see how your stock is doing during the "game" of making money.
Come see us and get to know what we have to offer you and your financial future.
Good Investing,
Bruce Cortez
Instructor, Owner
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