Technical analysis I
Introduction|
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172
20. Conclusion
Technical analysis is a particular approach to investing that will appeal to some investors and not to others.
- Whereas most investors concentrate on the fundamentals of a company (turnover, profits, growth etc), technical analysts are concerned with the share price itself.
- They believe that prices are driven by the psychology of investors rather than fundamentals. By understanding investor psychology, they can predict which way prices will move.
- The tool they use for making predictions is the chart. They plot price and volume data on a chart, and look for patterns and trends.
- There are numerous theories within technical analysis. They all depend on market psychology being predictable, and on chart patterns repeating themselves.
- By its nature, technical analysis tends to be useful for short-term trading rather than long-term investing.
Technical analysis and fundamental analysis are two very different approaches, but one does not completely exclude the other. If you focus on fundamentals, it is still worth checking out the chart of a company you are about to buy or sell. Similarly, if you focus on technical signals, it is worth checking the fundamentals of companies.
You have now completed the course. To test your knowledge, take the Assessment test.
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