Why understanding charts is a vital part of your investing arsenal
Fsp Invest Team, 17 Apr. 2013
Tags: charting, understanding the charts, charts, technical analysis, importance of charting in investing
Charts are a pictorial record of what’s taken place with a share price, index, derivative instrument, currency or commodity. Read on to discover why understanding charts should be a crucial part of your investing strategy.
Did you know that charts can tell you a story about the personality and price movement of an investment?
In fact, “technical analysis, or charting, is a priceless tool that allows us to use these charts to make astounding predictions of future price movements and thereby make consistent profits,” says Analyst Yonatan Rom.
The best thing about charting is that it gives you a map of the markets that’ll enable you to:
• Let the market to do the ‘talking’ and not your emotions.
• Trade as a calculated science and not as a gambler.
• “Ride your profits and know exactly where to place your stop loss to cut your losses short and your take profits levels to maximise profits,” says Rom.
Here’s why you should understand charting as an investor
• Charts focus on price movement. Charts are an easy and accessible way to see how prices are moving or not moving and they help you evaluate the strength of these movements.
“Volume, oscillators and momentum give a clearer picture of market action. And, because all of this is made available to you visually, charting can be far less time consuming than fundamental analysis,” explains Rom.
• Trading the trend is made easy. Because of the visual nature of charting, it’s easy to see whether a share is in an up or a downtrend. The trend is your friend – so being on the right side of the movement is one of the easiest ways to ensure you’re in a ‘winning’ position.
• Charts provide you with a wealth of information. Charts provide a huge amount of information in only a few moments. In fact, there are over 50 different indicators that help you easily see trends, support and resistance levels, as well as momentum, volatility and breakout patterns. “This information is critical to making sound and profitable investments,” says Rom.
Understanding technical analysis of charts is a useful tool in assessing the price movement of an investment.
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