You need technical analysis to trade. Technical analysis is the study of price history using the chart as your tool. It is the process of analyzing the market using certain variables to look for the best opportunities to trade. Technical analysis is a very important area to examine when making decision on what to invest in. In order to understand this, it is important we define what SECURITIES stand for so as to appreciate better. What are securities? The term simply refers to stocks, bonds mutual funds, commodities, currencies, futures, indices, options e.t.c.
TECHNICAL ANALYSIS TERMS
There are certain terms use in carrying out this analysis; this are as follows;
Open – It means the opening price of the periods.
High – It means the highest price that a security traded for the period.
Low – It means the lowest price traded for that period.
Close – It means the last price that a security traded for that period.
Volume – It means the number of shares traded during the period.
Open Interest – It means the total number of outstanding contract: that is, those that have not been exercised, closed or expired of a future or options. It is often use as an indicator.
Bid – It means the price a market maker is willing to pay for a security (the price you will pay to sell a security)
Ask – This is the price a market maker is willing to accept (the price you will pay to buy the security).
Price Pattern – It is a formation due to trend and trend reversal.
An overbought – This is when a security price has risen to an unreasonable level, and due for a correction.
An oversold – This is when a security price has fallen to an unreasonable level, and due for correction
A trading range – this is a sideway chart pattern – it is usually a resting period before prices resume their former trend.
Uptrend – an uptrend is increasingly higher than lower prices.
Downtrend – it is decreasingly lower high price.
BENEFITS OF TECHNICAL ANALYSIS
- Technical Analysis tool do all the number crunching for you.
- It penetrates the market to see the performance of different sectors and industries. To decide on securities prices and the stock that has buy or sell signal.
- It gives you level accuracy that enable you make profit in your trading.
- It can help you scan through the market using broad market indicators.
- It helps you test the Security price before risking your money.
- It helps you find the opportunities that match your criteria.
- It gives you the room to compare two or more securities at a time.
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