The Technical Indicator - The Benefits For Technical Analysis

Trading shares on the stock market is an adventurous financial undertaking and usually

people are unwilling to take on the responsibility of monitoring and analysis that are required to make successful trades. If you've been looking for a way to grow your money faster than the small interest rates that are available through high yield savings accounts and certificates of deposit, however, it's likely that you've considered some cautious investments as a way to diversify your plan for future wealth. When you become more familiar with analytical tools like the technical indicator, you'll begin to see that smart investing isn't as much of a game of chance as you once thought.

In case you're unfamiliar with the technical indicator and other analytical tools, you should know that technical analysis is a method of evaluating the past price movements of a certain stock as a way to make better predictions about what movements it is likely to make in the future. Being able to anticipate increases or decreases in price before they happen puts the investors in a better position to make a profit off of his or her investment. While it's not a fail-safe method for predicting future price changes, it is one of the best ways to make use of the patterns and trends observed in the market.

Simply put, the technical indicator is a series of statistics that are derived by using a formula to assess the price information of a certain security. This price data can include any combination of opening, high, low or closing prices over a period of time. Technical indicators can employ only the closing prices, while others might also incorporate volume and open interest into the formula. When used correctly, the indicator offers yet another perspective from which to assess price action in the market.

One of the most common types of technical indicator is the Daily High-Low Differential Ratio. By dividing the difference between the day's number of new fifty two-week highs and new fifty two-week lows by the total number of issues traded during that particular day, it's possible to calculate this ratio on a regular basis. Other common indicators include leading and lagging indicators, which can be used in a predictive fashion ahead of the price change, or after the price change as a way to confirm the trend. If these kinds of terms have your head swimming, it's a good idea to take a class or join an online investment community that can provide resources for practicing with them.

by: Aaron Livingston

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