Technical Analysis: Introduction
The methods used to analyze securities and make investment
decisions fall into two very broad categories: fundamental analysis and
technical analysis. Fundamental analysis involves analyzing the characteristics
of a company in order to estimate its value. Technical analysis takes a
completely different approach; it doesn't care one bit about the
"value" of a company or a commodity. Technicians (sometimes called
chartists) are only interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical
analysis really just studies supply and demand in a market in an attempt to
determine what direction, or trend, will continue in the future. In other
words, technical analysis attempts to understand the emotions in the market by
studying the market itself, as opposed to its components. If you understand the
benefits and limitations of technical analysis, it can give you a new set of
tools or skills that will enable you to be a better trader or investor.
In this tutorial, we'll introduce you to the subject of
technical analysis. It's a broad topic, so we'll just cover the basics,
providing you with the foundation you'll need to understand more advanced
concepts down the road.
