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Technical Analysis Charts: Generated Figures Synonymous to Profits
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The use of analysis is evident on different applications. Let us take a look on some of these applications and see for yourself the importance of analysis on different aspects of our society.
Probably you have done scientific experiments during your high school and collegiate years. Remember the process after you have conducted your laboratory experiments? What did you do to the data that you have gathered from such laboratory experiments? Definitely, you will perform an analysis of the experiment as a whole based on the laboratory data that you have gathered.
The application of analysis does not stop on scholastic activities alone. For instance you have a cataract (a kind of eye disorder) and you want to remove it so that you will be able to see clearly. Definitely, you will visit an iridologist (an eye specialist) and he will be the one to perform the operation. However, before the operation will be carried out, your iridologist will perform an analysis to determine if the operation is safe for you or not. In other words, the conduct of analysis is for your safety.
Even in politics, analysis is a critical element. Take for instance the federal laws governing the American land. Before the U.S. Senate approved a bill previously approved by the U.S. House of Representatives, there are debates conducted to discuss the possible implication of a particular bill once it is passed as a law. Aside from the debates, individual senators have their own analysis with regards to the content of the bill. As a matter of fact, debate alone can also be considered as an analysis.
See, analysis is almost on every corner of our society. No wonder you will see it within the walls of the business community, especially in the aspect of commerce.
The analysis popular to most traders around the market is referred to as technical analysis. It is a method of evaluating an asset or security through statistical analysis of different figures generated by market activities, present and past prices, and trading volumes. The intrinsic value of an asset or security is out of concern. Instead, technical analysts look at the stock charts for any pattern useful to determine the future performance of a certain asset or security.
Speaking of stock charts, technical analysis primarily makes use of charts for establishing future market trends. There are different types of charts used in technical analysis, and it includes the following:
• Bar charts- it is one of the popular charts in technical analysis. It is composed of vertical lines which represent the price of the security or asset being traded during that day. The top portion represents the highest price while the bottom portion represents the lowest price. The closing price of the security or asset is illustrated on the right portion of the bar and the opening price is on the left portion of the bar. A single bar in the chart represents a trading day.
• Candlestick charts- similar to bar charts, it shows the opening price, closing price, the highest price, and the lowest price of a certain asset or security. The only difference is that it makes use of color to show of the price of the asset or security went up or down on that particular trading day.
• Point and figure charts- this chart plots the increase and decline of security prices on a day-to-day basis. The increases are represented by a rising stack of “X” while the declines are represented by a decreasing stack of “O”. Such chart is traditionally used for intraday charting (a charting activity intended for just a single trading day) due to tedious task of plotting pints over a longer period of time.
Keep in mind that charts are important in technical analysis. Without them, no market price trends could be established.
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