Learn Stock Market Investing Techniques Through Technical Analysis

By Christopher Fitch

Beginning investors who want to learn stock market investing techniques will gain a competitive edge by digging into the different types of technical analysis patterns and indicators. While technical analysis is never enough as on its own, it can certainly give investors an indication as to whether they should buy or sell stock.

Although there are literally hundreds of different technical analysis measurements, the three discussed here are among the most reliable formation that investors will cross. It makes the most sense to discover them as soon as possible when one starts to learn stock market investing techniques:

Head-and-Shoulders. Long considered the strongest technical indicator, a head-and-shoulders formation provides a very reliable trend indication as to whether to buy or sell a position in the stock under consideration. A head-and-shoulders top pattern has three sharp high points, created by three successive rallies, with the second rally reaching a higher point than the first and third rallies. This formation is a strong indication to sell the stock and is quite easy to spot, even for people who want to learn stock market investing techniques. Investors should use volume as a confirmation of this patter, with volume highest on the first rally (the left shoulder) and lowest on the last of the rallies (the right shoulder).

Gaps. Arguably the easiest indicator to see, a gap occurs when a low for one day is higher than the high of the previous day. Gaps provide resistance and support levels for stock and while people beginning to learn stock market investing techniques are drawn to such patterns, they should be traded cautiously. When an ongoing trend crosses over a previously formed gap, it normally signals a strong price movement is occurring or about to occur.

Bollinger Bands. Used as a tool, Bollinger Bands are not stock price patterns. Instead, they are an oscillator, which tells investors about the probability of a stock trend. For people who want to learn stock market investing techniques, Bollinger Bands are a must. They give a buy or sell signal based on a stock's volatility as it moves two or three standard deviations from its mean. When the stock price closes at or above the upper band, it triggers a sell signal (vice versa for the lower band).

Investors who are eager to learn more about stock market investing techniques can find plenty of instruction on-line. For those who prefer a more hands-off approach, there is an equally abundant amount of trading software that will complete all of the analysis. Most software measures the same statistical data that full-time technical analysts measure and is therefore a worthy investment. - 31382

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