How do we trade stocks using technical analysis?

The goal of this blog is to teach you how to trade stocks profitably and make money on the stock market. There are many approaches that traders use to pick stocks: technical analysis and fundamental analysis are the two most popular ones. Fundamental analysis is the study of a company鈥檚 fundamental background whereas technical analysis focuses primary on chart patterns of a company鈥檚 stock price.

People usually use fundamental analysis for long term investment and they spend a lot of time studying a company鈥檚 structure such as income statement, balance sheet, growth potential, management, their competitors, and much more. People who use this strategy tend to hold their stocks for years and are normally referred to as long-term investors. An example is Warren Buffett. There is a lot of research to be made and might be difficult to understand, especially for people without the basic accounting knowledge.

On the other hand, people who use technical analysis do not care about any of these. They use charting software to study the chart patterns of a company and if it looks good, they will buy the stock. People who use technical analysis usually hold a stock for a much shorter period, ranging from a few minutes to a few weeks. They are often referred to as traders (e.g. swing traders, day traders). Their buying decision is made anywhere from five minutes to an hour, which saves a lot of time. I believe this is one of the most profitable and easiest approaches to trading.

The following shows a sample stock chart聽for ZQK – Quiksilver, Inc. We will go into details on how we can use technical analysis in the coming entries.