Top 4 Benefits of Technical Analysis

Technical analysis is the study of stocks and markets as they relate to price data only. Technical analysis does not concern itself with the researching of the fundamental information and prognosis--that’s left for fundamental analysis. Fundamental and technical analyses are somewhat at odds with each other. Some market experts use both, and some use one or the other. The main benefits of technical analysis are that it takes less time than fundamental analysis, can easily take advantage of useful resources, is inexpensive to employ and focuses more on strategy and execution.

1. Takes Less Time

Proponents of technical analysis believe that all the information and research is already priced into the markets. One can speculate faster with charts and price data. Just by looking at the charts and by having technical expertise, someone using technical analysis would benefit from sticking to studying the charts and data. That means that less time is spent on irrelevant information and more time is spent becoming familiar with the price movements of the market in question.

This also means that more time is spent focusing on execution and ultimately focusing on profits and managing losses. That’s why most traders use technical analysis, while most investors use fundamental analysis. Technical analysis focuses on the execution of the trade as well as profit and losses in the near term, whereas fundamental analysis focuses on value and long-term potential.

2. Ready Resources

Charting involves being resourceful. There is an abundance of technical indicators available in many trading and charting packages that can lead to good analysis and strategies. Much research has gone into many technical indicators that are included in trading software and packages that afford the everyday trader built in resources and a wealth of information. This allows anybody and everybody to learn to plan a strategy without having to create her own methodology, which can cost a lot of time and money.

3. Inexpensive

These technical indicators and software packages are relatively inexpensive. They can be managed by one person and used to a desired end for the further analysis and creation of strategies. Because they are so inexpensive, the barrier to enter into day trading with technical analysis is low, allowing dedicated individuals to engage with and succeed in investing and trading. Thanks to the aforementioned benefits and economics of technical analysis, one’s own character is the driving force for success in trading.

4. Strategic

Technical analysis is a precursor to building a good strategy. Thanks to the aforementioned benefits, technical analysis focuses the trader on the execution of a strategy that is suitable for his or her trading style. There are as many strategies as there are traders. One’s own creativity and perseverance are the only limitations. This strategic focus allows for better success from a strategic standpoint. For instance, instead of just researching the news revelations and fundamental information, traders can know systematically and strategically how to place their trades and when to close a position. This is by far one of the most important aspects to technical analysis.  

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