In fact, technical analysis has become more favourite than ever over the last several years. Traders evaluate past price movements to help forecast a security’s future price.

Fundamental analysis, the substitute method of stock evaluation, relies on a stock’s intrinsic value and requires a broader understanding of industry conditions and how companies are managed.

But how do investors look at the data, and what exactly are the advantages of technical analysis?

RushTrade, like many other brokers, provides candlestick charting as a technical analysis tool for their traders. Candlestick charts have been used for hundreds of years and are derived from a Asian version used to examine the price of rice contracts.

Like a bar chart, the regular candlestick line shows the market’s open, high, low and close of a specific day, but also uses color and shading to help clarify the range between the open and close of that day’s trading.

A huge difference between the common bar charts and the Asian candlestick charts is the relationship between opening and closing prices. Bar charts place more emphasis on the progression of today’s closing price from yesterday’s close. Candlestick chartists are more interested in the relationship between the closing price and the opening price of the same trading day.

Technical analysis methods work from the assumption that the market is more psychological than logical. Thus, candle patterns are essentially reactions of traders at a particular time in the marketplace. People often react en masse to situations, and this grants candlestick chart analysis to work.

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