What are the advantages of technical analysis?
Entry and exit strategy is recommended for short and long-term trading in technical analysis. Fundamental analysis is used for the long-term entry and exit point.
Nov. 21 2019, Updated 5:02 p.m. ET
Advantages of technical analysis
In this part of the series, we’ll discuss the advantages of technical analysis. This is useful for trading strategy.
Market news reflects the stock prices
The stock price is a reflection of all fundamental news. The crowd market psychology is identified using the patterns. It’s used for price forecasting. This helps investors make informed investment decisions.
Trend identification
The direction of the stock market trend is identified using technical analysis. The stock may be in an uptrend, a downtrend, or a sideways trend. The trend direction is useful when you’re investing and trading in stock markets.
Entry and exit recommendations
Entry and exit strategy is recommended for short and long-term trading in technical analysis. Fundamental analysis is used for the long-term entry and exit point. When fundamental news is available in the market, the stock price already changed. Some traders use a combination of trend indicators, patterns, volume, and moving averages to determine the entry and exit point.
The above chart shows the entry and exit signal for IBM’s (IBM) stock. In the above chart, the stock breaks above resistance. So, entry is suggested. Trendline resistance is used to determine the target level.