What is technical analysis?
This is the obvious question everybody asks. Technical approach to investment is essentially a reflection of the idea that prices generally move in trends, and are determined by the changing attitude of the investors, towards a variety of economic, monetary, political and psychological forces.
The aim of a Technical Analyst is to identify trend changes at an early stage and maintain an investment posture until the weight of the evidence suggest that the trend has indeed reversed.
Technical analysis is the study of a stock's past price and volume behavior to find out support & resistance zones and on the basis of this study, applying a few indicators and oscillators on the current price movement to project the future price movement. If applied correctly, to trade or to invest in comparison to the BUY & HOLD strategy, difference of the gains earned could be drastic. Simple reason for this gain is that as we have stated earlier, prices generally move in trends during any time span. You buy when we project that downtrend is going to get reversed soon and sell when it has gained significantly and ready to correct. This is the time to sell and wait till this correction is over when prices start to move up again and buy that stock back. This cycle goes on....