Why Is Technical Analysis Important In Stock Trading

by Pooja Singh SEO

You may have been investing in the stock market without ever delving deep into the technicalities of a stock. Most of your decisions are based on the recommendations you come across from the experts. While this may have held you in good stead so far you shouldn’t overlook the importance of technical analysis. As you grow your investments and hope to earn higher returns you need to learn the art of technically analyzing stocks and be able to make your own decisions. Here are some of the ways in which mastering the art of technical analysis shall help you :

• Study the health — Studying factors such as P/B ratio, dividend history, P/X ratio, volume, the percentage of deliveries, operating profit and so on you will be able to judge the health of a company. This will let you make informed decisions as far as stock is concerned and not base your buy calls on half-truths and lies that often float around in the market.

• You make your decisions — So far most of your investments may have been based on recommendations. While it is good to listen to the experts most of them are picky and choosy about the stocks they recommend. Small caps which promise you higher returns are often outside their radar. When you develop skills in the technical analysis you will be able to analyze stocks of your choice and not depend on others to help you make the right calls.

• Price prediction — The most important aspect of stock market trading is buying and selling at the right price. Is a stock overvalued? Does a bull stock’s price still have headroom for growth? Should you sell the stock now or enter in it? These are some of the things that you always have in mind. While the technical analysis may not offer answers to all your questions it will surely give you a direction to work on.

• Support & Resistance Levels — You may have heard these two terms being used by analysts while discussing stocks. Support and resistance levels help you understand when to buy and sell stocks and you need to develop the art to identify support and resistance levels.

Technical analysis is a scientific way of analyzing a stock. It keeps out all the intangible factors and emotions out of the decision-making process and improves the odds of reaching an accurate forecast with your investments. Sign up for an online technical analysis course and you will be able to earn healthily from your investments.

In this write-up, we discuss the importance of technical analysis with respect to stock trading and how you can earn healthily from the market studying the technical aspect of a stock.