Technical Analysis
of Stocks

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The art of predicting the future direction of a stock

In the stock market, from our point of view, technical analysis involves using the information provided in stock charts to determine which stocks to buy, when to buy, how much to buy and when to sell. People who use a companies fundamentals to make their buying and selling decisions tend to be investors not stock market traders.

stock chart with technical indicators image

Before you begin your journey into technical analysis, you need to determine:

1. What type of trader you are?

Based on the definitions we will use, there are four different types of traders: Scalper - holds stocks for seconds to minutes

Day trader - holds stocks for minutes to hours
Swing trader - holds stocks for days to weeks
Position trader - holds stocks for weeks to months

Note: While an Investor also buys and sells stocks, they hold stocks for years to decades. Remember, stock investing and stock trading are not the same.

2. What time frame are you going to trading?

The time frame you are going to trade determines the type of stock charts you will likely use. The following is a general idea of what type of stock market charts different traders use:

Interday charts - used by scalpers, day-traders and swing traders
Daily charts - used by swing traders and position traders
Weekly charts - used by position traders and investors

Many traders choose to put indicators on their stock charts to help them identify their entry and exit point. There are hundreds of indicators so choose them carefully.

In technical analysis, the trader uses stock charts to:

Identify which stock to buy

how many shares to buy
Identify when to buy
Identify when to sell

3. Finding trades 

To find trades, stock traders generally use either a paid or free stock market screener. These stock screeners identify stocks that are doing what the trader wants. For example, some traders look for new 52-week highs, moving average crossovers or signals from various indicators.

This site deals mainly with trading stocks using swing trading and position trading techniques.

To broaden your skills as a stock trader, you should consider reading many of the great books that have been written on the subject. We have a number of book reviews on technical analysis in our book summaries section which you many be interested in.

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