Technical Analysis for Investors

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Technical analysis aims at providing answers to the basic questions of whether a stock has a visible trend in its prices. Moreover, an investor needs to know if there is an indication or possibility of reversal in the trend of prices. Technical analysis uses many tools and has developed into a vast body of knowledge. Technical analysis basically uses three types of charts.
Let us take the following example with the information about share prices as given below:

1	31
2	32
3	34
4	35
5	29
6	27
7	34
8	25
9	29
10	30
11	26
12	35
13	28

1) A line chart:  The closing points for each day or a  chosen period of time is taken a a point . The period chosen can be a day, a week, a month or a year. When these points are joined together, by a trend line, they form a line.

2)  The information plotted refers to the volume and price of trading each day. The same information plotted can be formed into a bar chart also.

3) In a point and figure chart , a box matrix is used. Each rise in price is marked with an 'X' and each fall in price is marked with an 'O'. This chart can help establish pivotal or periodic prices, based on the trend set.These will serve as an indicator of whether the prices of the stock will either increase or decrease.