# Technical Analysis

## Stock and Financial Indicators

### What is Technical Analysis?

Technical analysis is a reasonably broad subject, with many different indicators which can be used to measure data, so the definition is equally broad too. It can be used for stocks (or shares as they are more commonly known in the UK), currencies and many other financial instuments. Basically technical analysis involves comparing the price of a stock (or currency etc) at a particular time or range of times with the price at another time or range, and applying mathematical or statistical formulae in an attempt to forecast the future movement of the stock and to try to establish the best time to buy, sell or hold the stock in question.

In most cases a graphical representation of the stock's price is used for technical analysis. The indicator can then be overlaid on the graph itself. In the past this could involve much manual calculation and plotting, but fortunately now that we are in the age of computers, our trusty PCs can be used to do the necessary calculations these days using software available. Alternatively you can find a nice range of up-to-date technical analysis charts for many stocks and shares out on the web at financial and stockbroking sites.

Technical analysis can be in the form of moving averages, overbought or oversold indicators, points of support and resistance, rate of price-change indicators and other methods. Some methods are considered to be better for markets in a very volatile state whereas others are thought to be better for markets that are trending steadily upward or downward. Also the relative volatility of a particular share compared to the general market may be a consideration.

### Effectiveness of Technical Analysis - Does it work?

With the myriad of different Technical analysis indicators it can be difficult to establish what works for you and what doen't. There are so many different indicators and thus numerous ways of interpreting the price movements that it can be difficult to know what to do. From personal experience I think the best way to approach the subject to start with is to study a number of charts of the same stock or share, with different technical analysis indicators overlaid on the price chart. Compare the indicator's movements or signals to and see if you can spot a pattern in a particular indicator and then check to see if that indicator works with other different stocks. That way you can get an idea of what indicators work for you.

It is a good idea (when picking stocks to buy or sell) to not just rely on one indicator but to buy or sell when two or more different indicators are giving the buy or sell signal. And never forget the fundamentals - always research the company that you're interested in to find how well their profit and turnover etc has been over the past few years and analyst's forecasts of forthcoming results.

Technical analysis articles by Pandacash:

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