Technical analysis

Technical analysis is about finding patterns and trends in prices, this analysis method is common for share prices. Studies have found that certain historical patterns gives predictable effects on the share price, this has given rise to technical analysis.

Technical analysis depends heavily on stock market psychology. Stock market psychology means that the people trading on the stock market follows certain patterns and react in the same way on share price fluctuations. People buy shares when a stock price has a upward trend and sells shares when a stock price has a downward trend.

Technical analysis is performed on a professional basis by different analysts. There are many books on the area and also software which can help you to perform technical analysis.

Technical analysis is about working with trend lines, averages, formations and other mathematically calculated ratios of the share price. Those who work with technical analysis claims that you can extract a lot of information from the stock price only. The way in which the share price changes and the formations formed in the stock price gives buy-signals and sell-signals.