Fundamental Analysis versus Technical Analysis (Part 2)

Technical Analysis (TA) investors are often mistaken as speculators or gamblers. In my humble opinion, speculators in the stock market are gamblers in the true sense where they buy and sell shares for no apparent reasons.

It is true that in reality, TA investors ARE speculators in the sense that they try to predict the movement of stock prices base on past performance, but they are not gambling with their money because they also refer to other indicators such as the price trend, technical indicators, chart patterns and market sentiments or market psychology.

As the term suggest, TA investors plan their portfolio based on the technical aspects of the stock market. Contrary to FA investors, TA investors are usually short term investors where they buy and sell a particular stock within a few days time and they target small profit in each transaction. In the long run, these repeated process can be fruitful, but the risk associated with this kind of investment is higher. Even when all signals show indication to buy, just one bad news can be disastrous to the investor.

To become a successful TA investor, one must seek knowledge of chart patterns, stock trends and the technical indicators. Investors must also be alert to the slightest movement of the stock market, as TA investors also use market psychology as a guide in making their decision.

For example, TA investors must know the bullish and bearish signals of the Japanese candlestick chart, support and resistance level of the stock price and also technical indicators such as Bollinger Band, Moving Average, Moving Average Convergence-Divergence (MACD), Stochastic Oscillators and many others. Its not easy actually to predict the market, there are many things that need to be taken into consideration.

So, in the next post I will conclude my discussion on this topic. Stay tuned!  =D

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