Wednesday, March 30, 2011

Stock Exchange Technical Analysis-Trend Following Can Imply Large Profits

By Gunawan Wibisono

A primary reason technical research works, is really because stock costs do have a tendency to move in a specific direction for quite some period. This direction can be up, down, or sideways. Newton's first law of motion applies to this very well. It states there's a natural inclination for objects to resume in the same direction. Momentum is another word to explain this phenomenon.

The most significant tool in market technical analysis is the trend line. When a stock is following along a trend line, it'll have a disposition to keep on moving along that line. Correctly investigating this line will give you the facility to spot a trend. At about that point, you'll have an instant edge over a general majority of partakers in the market. Putting as many factors as practical in your favour before taking a position in the stock exchange, is very important to long term success.

Marketwise, an uptrend is identified by a collection of successive higher highs and higher lows. A downtrend is a collection of successive lower highs and lower lows. Spotting an uptrend employing a trend line involves drawing and connecting at least three lower points along the line. A downtrend line is drawn by connecting at least three higher points. In a sideways trend, both lower and upper points are just about parallel, straight horizontal lines.

The longer a stock has been moving in a trend, or inside a parallel channel, the stronger this trend most likely will be. On a breakout from a price channel, you need to see a major increase in volume. This helps to confirm the breakout as most likely being successful. Trends on a monthly or weekly chart, sometimes are rather more trustworthy than trends on charts of shorter durations.

My next article on market technical research will be about volume. Volume is a main factor, and researching it correctly can be worth a fortune. Volume tells you what enormous establishments like funds, annuity funds, hedge funds, and other giant stock exchange players are doing.

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