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 Technical analysis has been developed into the complicated science that is in the constant research and development. Started more than hundred years ago with introduction of DOW indexes now technical analysis covers indexes that track different markets, technical indicators that describe various price and volume behaviour, analysis of volatility, trading sentiment, psychology of traders, developing of trading strategies and building trading systems. If hundred years ago traders used only DOW indexes to examine the market and see the general market trend, now, with revolution in the information technology we have hundreds of technical studies to examine market. In the current moment, the most often risen question is developing of a trading system based on the several technical indicators – trading system that would grant automating process of making trading decision and excluding emotional bourgeois from the trading.
 
Using several indicators has been always challenging process for many traders. The first question that many investors ask is how many and what technical studies should be used in the market analysis. There is no straight answer on this question. The indicators selection depends on many factors where the trader’s individualized trading style and knowledge of the market could be first in the line. However, there could be general reasonable suggestion that could be used by everybody:
 
1. Use those technical indicators that you are familiar with and have practice in using. If you novice trader then you might begin from the easy one and then move to the more complicated. Price moving average and volume moving average are two basic indicators that are used as a foundation in many other more complex technical studies.
 
2. Security trend is always described by a change in the security’s price and traded volume (number of security’s shares) during this price change. Therefore it would be logical to have in the arsenal at least one technical indicator based on the price and one that describes volume. As one of the rules in technical analysis says “there is no price change without volume and there is no volume without price movement”.
 
3. It could be useful to keep an eye on the security and market volatility. Professional analysts know that the market behaves differently in Bull and Bear market, that resistance point differ from the support point and that depending on the volatility different indicators setting could be used and trading system should always be adjusted accordingly in order to react on the trend reversal when it’s not too primeval yet and when it’s not already too late. Depending on your knowledge and data access you might use VIX (volatility index based on the S&P 500 options), ATR (Average True Range) or any other volatility indicators.
 
Those are three basic rules that could be suggested to any trader, especially to a trader who is making first steps in the technical analysis.

Stocks and shares can be a very lucrative source of income, provided you are well aware of how to play the game by conducting a thorough technical analysis of stocks! However, with the World wide web also plunging into the world of finance, more and more people like you are getting into online trading. And why not? Trading in stocks is definitely an excellent way to grow yourmoney; it provides an extra source of income!

Here are some features associated with stock trading and technical analysis of stocks–

(1) What exactly is meant by trading in stock?

Most companies need ongoing capital to keep running their businesses. So they offer their stocks to interested traders. If you are an investor, you place in money (small amount or massive amount) of your own and buy those shares. You are now a stock holder or a shareholder in the company; actually, a partial owner of the company since you have purchased a part of the company.

(2) The reason for buying stock is that you believe the company will prosper and the price of the stock will go up in the future. Thereby, you get your share of the profit.

To illustrate with an example, Microsoft was not very well-known in the 1980s. Yet, some people purchased its stocks and retained them for a very long time. Today, the company’s value as well as the value of those stocks have shot up beyond anyone’s imagination!

(3) Again, all companies (old and young) that promise future profits need not necessarily deliver. There is no guarantee about gains and losses, especially if it is a newly-launched company. The only thing is that as a shareholder, you have some state in running the company!

Of course, if the stated company is covering bankruptcy or law suits, you can state nothing except grappling the certainty of losing your money, as the value of the stocks will tend to be low or become completely worthless!

(4) If you are the lone investor, a broker will need to act as the mediator for all transactions. These go-betweens do the buying and selling of stocks on your behalf, taking a small commission in the process. Even then, they are only acting upon your instructions; they are in no way concerned with decision-making.

(5) Since this can become quite a headache, it is advisable for you to go in for technical analysis of stocks beforehand. What this means is, studying the forecasts of stock prices and movements of the stock market. The intent is for you to comprehend what is going to happen in future to the stock you are already holding, plus the future trend of any new stock that you are planning to purchase.

(6) Technical analysis of stocks is an extremely powerful tool in your hands, since it will help to lessen risks and increase gains. Also, you attain some sort of security in the trading business since the charts display past prices of stocks as well as what the future prices could be.

(7) At the same time, You will have to ensure that the information that you get is totally reliable. If the information related to trend reversals and the times they are expected is incorrect, you are putting yourself at risk and also losing out on profits which might be coming from another direction.

(8) A particular stock could be bearish, bullish or neutral. Where will this information come from, except from the technical analysis of stocks?

(9) Another reason for going in for technical analysis of stocks is that you are not the mortal in charge of market prices, and they will keep rising or dipping constantly. Whatever stock you intend to buy at any given time, is going to be expensive or low-priced. At least, the analysis keeps your forewarned!

(10) Finally, given all its benefits, technical analysis of stocks can never claim to be 100% accurate. It can only predict the outcome of particular stocks. Hence, use this only as a guide, not as a be all and end all for your stock trading encounters!