Sam236

Fundamental analysis is a method used to evaluate the worth of a security by studying the financial data of the issuer. It scrutinizes the issuer's income and expenses, assets and liabilities, management, and position in its industry. In other words, it focuses on the "basics" of the business. If you want to use fundamentals to help you make an investment decision, you would rely heavily on an offering prospectus, annual and quarterly reports as well as any current news items relating to the issuer whose securities you are considering. I think technical analysis is very beneficial for a variety of reasons: • The markets are driven by greed and fear, more than supply and demand. An economic report itself is meaningless: It's the traders’ reaction to the report that moves the market. • You can interpret financial data and economic reports any way you want, but support levels and weekly highs are the word. It’s easier for a general investor to interpret hard facts than financial statements- which needs relevant education. • It’s easier and faster to learn technical analysis. You can learn the basics by reading a couple of book, while you need to study micro- and macro-economics to interpret economic reports. Here’s an example: The "Pending Home Sales" were released and were much worse than expected: Instead of an expected 0.7% decline we saw a whopping 2.6% decline. Yet the major stock indices went up when the news hit the wires. Wouldn't you think that bad news drives the market down? Well, the traders reason out that: Since the data came in much worse than expected, the Fed is more likely to lower interest rates and that's good overall, so the market went up. At least temporarily. Then "renewed credit concerns" sent the market down again. But by just looking at the economic report the market should have moved down, yet the trader’s reaction to this report moved the market up. So you can see why I have an inclination towards technical analysis. Keep in mind that big trading companies like Goldman Sachs are employing analysts with PhDs in economics, and you shouldn’t expect to be smarter than them.

Indicators simply use this data and display it differently by setting certain variables in relation to others or previous data. Today more than 150 indicators are available. Even indicators of indicators are also available. However, what ever may be the number of indicator you must remember that these indicators are mainly based on five variables. They are The Open, High, Low, Close and Volume of certain period. Moving averages displaying the relationship between a series of closing prices over a period of time and Williams %R displaying High and Low to the close, are the examples of the indicators. It says that most indicators are just “skewing” the data contained in the bar or candlestick chart which display the “purest” form of data: The Open, High, Low and their close relationship to each other. I personally use a simply bar chart with volume information. For further information visit: http://www.rockwelltrading.com