How do I Pick Stocks Using Technical Analysis?
Technical analysis refers to chart patterns that are graphic representations of price movements over various periods of time from one day to several years. The predictive value of charts is based on the premise that stock moves result from human actions, and since human nature does not change, chart patterns recur.
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Choose a Method
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Several schools of technical analysis are based on the charting method, time frame, scale and tools used; none is better than another. Select the one you feel most comfortable with and learn it.
Chart Patterns
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The key is to be familiar with chart patterns, recognize them as soon as they have formed and act on them to increase your probability of success.
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Timing
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A popular misconception is that a technician can look at a stock chart at any given point in time and tell what a stock is going to do next. Stocks spend most of the time forming chart patterns. Until a pattern is formed, it's virtually impossible to tell what the next move of significance will be. The time to act is when a stock moves in the direction suggested by the chart pattern, thereby validating it.
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