Learning Technical Analysis the Easy Way

Knowing when to buy or to sell is an ability you can only master with time and experience when dealing in stocks. Past experiences and all mistakes made in the past actually may help you learn the mechanisms that drive the stock market. Some people require many years of learning to accomplish such a feat.

But let's take a look at technical analysis as sort of a short cut. What if you could avoid making those mistakes from the start and learn how to avoid them before you even make them? You could understand beforehand how everything works and what makes the stock market tick without any risk of losing your investment.

Mastering the technique of technical analysis is the best way you can accomplish the heavy task of foreseeing mistakes before they are made. Many investors and brokers who ignore this aspect end up failing in their job. This is because noticing certain patterns and formations beforehand about the stock market is vital for success. Ignore them and you will be out of business very quickly.

So what is technical analysis? This method represents a type of visual aid that helps you identify certain trends or patterns in trading that you can use to your advantage. There are, of course, more complicated ways you can do this and get better results; but for a beginner the main starting point are price charts.

What should you look for in specific market trends? Well this can be a little complicated, but with time and doggedness, you can achieve some degree of success. You should start by looking at specific correlations between volume and prices. Look for highs and lows in prices and the connection with the volume of stock sold or bought. Be aware of the fact that a human is a creature of habit. What this simply means in essence is that certain patterns often reoccur which you can use to your advantage.

Technical analysts often use complicated schemes that depict certain price patterns such as "the head and shoulders" or "the double top" to make sense out of the vast amount of information they receive. But for a beginner all of this can be overwhelming. The bottom line is to start with the basics of technical analysis and charting.  Remember the most important and most representative information is always hidden in the prices of stock. The market price is your closest ally and the present trend is your friend. 

Current trends are represented in a chart, so look out for variations in the trend and adjust your portfolio accordingly. If the price lowers and rises again constantly at a lower level than the previous high, this means that the value of the stock is shrinking. But if in the next month, the value of a certain stock reaches the value of some of the lows recorded in the previous month, this may mean that the stock is pausing in its valuation and may start to grow again in value soon.

So remember to always look to the price and current trend, as they give you an idea of what to do. This is one of the major tips of stock trading.