Essential Technical Indicators

The topic of technical analysis has filled many books that still only scratched the surface. Essential Technical Indicators is by no means an exhaustive explanation of the entire realm of technical analysis; however, it does provide a summary of the most important concepts and indicators that technical analysts rely upon to analyze price movement.

The difference between fundamental and technical is a good starting point for understanding how it all works.

Both disciplines are most effective when used together because each side approaches analysis from a different perspective. The collective insights you gain by combining the fundamental and the technical are more valuable than either analytical school of thought can provide alone.

Key Point

Fundamental and technical analyses begin from different starting points, making them most valuable when used together.

Technical analysis relies on the study of price patterns and trends of stocks. Fundamental analysis relies on the study of historical financial results and capitalization of companies. Both are intended to help select companies and their stocks, even though they come to the question with vastly different assumptions. Because fundamental science is historical and focused on the company, it is the favored technique for investors. This contrasts with traders, who focus on timing of entry and exit in positions in the short term, with little focus on long-term investment value or comparative quality of the company itself.

It is not only possible, but wise, for an individual to devote a share of the overall portfolio to each side. Thus, you build a long-term portfolio of stocks based on the principles of value investing, and you also use a portion of capital for short-term trading based on current market conditions and the rise and fall of prices. In order to accomplish this two-part strategic method, you need to understand the basics of both sides. Following are the highlights of basic technical analysis every trader needs to master.
By Michael C. Thomsett
Michael Thomsett is a British-born American author who has written over 75 books covering investing, business and real estate topics.

Copyrighted 2016. Content published with author's permission.

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