Stock Technical Analysis, Is It Useful?

Stock market conditions that fluctuate greatly test the trader's mentality. Sometimes when the Stock market is moving stable or bullish, the technical analysis you use is likely to be much more accurate than when the Stock market is down.

Stock Technical Analysis, Is It Useful?
Technical Analysis @investopedia

The same technical analysis can give different results in opposite market conditions. When the stock market is down, or the stock price has not moved as expected, many people think that technical analysis is 'useless':

"It's useless to learn technical analysis, if the dealer doesn't want to increase the price, the price won't go up"

Technical analysis will be useless if the stock market is downtrend

The question is: Is technical analysis really useless for trading? Is it the stock dealer who determines the movement of the stock, while technical analysis is just 'engineering'?

Is it in a downtrend stock market that technical analysis is no longer useful because the stock price, which seems to be going up, is still going down?

This is what we will discuss in this post, so Stock traders can get a true view of stock analysis.

During the world of stock trading, I concluded that technical analysis is VERY USEFUL in any market conditions, whether the stock market is bullish, sideways, bearish.

Technical analysis is very useful if you use it with analysis, stock screening and the right considerations. Technical analysis cannot be used rigidly.

For example, if you study a certain indicator that says that a stock that goes up from the 20 line means it's time to buy. So, when you find a stock rising the indicator line is above 20, it doesn't mean you have to buy the stock right away.

Choosing the right stocks, carefully looking at market conditions, a combination of technical analysis are the analyzes that you must use so that you can achieve maximum profit in trading.

"But what about the stock dealer, sir. Isn't the stock driven by the stock dealer who has a lot of money? So what's the point of technical analysis then?" you said.

So far, you have gained an understanding of the importance of technical analysis for traders. Now we will discuss more deeply why technical analysis is useful, and technical analysis is the main analysis that should be used by all levels of traders:

1. Technical analysis is a reflection of the city's psychology

All stocks must have a dealer. But the dealer's ability to move a Share is different. The more liquid a stock is, the lower the dealer's ability to raise and lower the stock will be.

This is because liquid stocks have a lot of demand (retail traders), so the ability of stock dealers to raise and lower prices is not too significant compared to illiquid stocks.

Because a stock has a lot of demand & the ability of the dealer to raise and lower the stock is getting smaller, the stock price will move more regularly, thus forming a pattern and trend of stock trends, and this can be seen from the chart.

This Stock Chart (technical analysis) is a psychological reflection of the city that occurs through trading transactions between the dealer and retail traders. The more liquid a stock is, the easier it is for you to analyze chart patterns and trends in the direction of a stock's short-term trend.

Stock technical analysis

For example, you can see the Stock chart above. In the chart above, you can analyze many things, from looking at crucial support and resistance points (square marks), to candle patterns and chart patterns that form on the chart.

The patterns that are formed are a reflection of historical trading that shows the behavior and desires of market participants (both dealers and retail traders).

Because the city's psychological reflection can be seen through technical analysis, technical analysis is very useful for making trading decisions: To buy stocks, analyze, set selling targets.

2. When the stock market is bearish, technical analysis and market momentum can generate maximum profit

When the stock market is bearish, many think technical analysis is useless. This is an incorrect assumption. As I wrote earlier, using technical analysis, not just buying stocks when the indicator shows a buy signal.

But you have to analyze market conditions, see trading momentum and do a combination of technical analysis, so that in bear market conditions, you can actually use it to buy good stocks at discounted prices.

Not every time you have to buy stocks. You have to do stock screening, wait and see and buy technically good stocks when Stocks are going up / rebounding. With this method and analysis, technical analysis will be useful when the market is bearish.

3. Technical analysis is useful for 'certain stocks'

The notion that technical analysis is 'useless' is not 100% wrong. Why?

I have to admit, there are many stocks that cannot be analyzed by technical analysis, namely fried stocks / three-tier stocks.

Stocks that are illiquid (read point 1) are very easy to be fried by bookies and few enthusiasts, so that stock price movements are irregular, and technical analysis cannot describe the psychological reflection of the market, due to irregular stock transaction patterns.

Therefore, technical analysis will be much more useful to be applied to liquid stocks, in this case, blue chip stocks and second-tier stocks.

So if you want the technical analysis you use to be more accurate and generate maximum profit, prioritize trading in stocks with good patterns. Don't forget to screen stocks that are worth buying with technical analysis.

Through this post, we can all conclude that technical analysis is very useful for trading, and looking for potential stocks.

It's a pity that there are many sentences that say "technical analysis is useless", "the bookie who moves stocks, no need to learn technical analysis". share.

From now on, those of you who want to delve into short-term trading, you should focus on learning technical analysis, and putting it into practice in trading activities. Never ignore technical analysis as the main analysis for choosing stocks.