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Top 5 Benefits of Technical Analysis

Benefits of Technical Analysis

The stock market is one risky affair that no common man wants to rely on.” It used to be the usual perception of people a few years back. But with changing scenarios and evolving market conditions, this ideology is also modifying, giving more space to market expectations, and boosting reliability on one’s trading & investment skills. This is where professional trading skills come into the picture where you get familiarized with the technicalities of the financial market and learn how to dodge risk while turning almost every possible market condition into a lucrative opportunity.

Let’s Know Technical Analysis

Technical Analysis is a trading method that experts use to evaluate and predict price movement in the times to come. This price movement could be a stock, currency, commodity, cryptocurrency, or anything. Under this, the technical analyst identifies trading opportunities in price trends and patterns with the help of charts. Our SEBI-Registered Research Analyst, Ashutosh Bhardwaj has mastered this art to such an extent that he is here to give you some sound advice regarding technical analysis, its tools & techniques, and its benefits.

Key Components of Technical Analysis

  • Charts: from line charts to bar charts, Technical Analysis can be done using these records. It helps visualize historical or chronological price data of financial assets. It is the easiest and foremost tool to identify and analyse the market scenario.
  • Trends: it is well-known among money market people that prices move in trends and these trends keep going on for a long time. A technical analyst knows after recognizing the market trend which one will shoot up (bullish), which one will drop down (bearish), and which one to remain sideways (neutral).
  • Volume: considered an important factor in technical analysis, volume analysis is essential for the same. When the price movement fluctuates, it means volume is changing as well, where the strengths and weaknesses of price movement can be identified.
  • Candlestick: different candlestick patterns help in getting additional information about the price movements in the trading world. Each pattern has its own interpretation pattern that tells a different story.
  • Indicators: technical analysis is mainly about using a variety of indicators and oscillators that include moving averages, relative strength index (RSI), moving average convergence divergence (MACD), and more. It also helps in identifying overbought and oversold conditions.

Benefits of Technical Analysis

1. Entry-Exit Matters: Once you refine your skills in Technical Analysis, you can easily identify all the possible entry and exit points in the market without losing your financial resources. The study and analysis of historical price patterns and trends, help technical analysts calculate future price movements for making prompt decisions.

2. Price Targets: For setting price targets, Technical Analysts make the most of chart patterns and indicators. It not only helps traders set realistic expectations for every possible price movement but also makes a sound and well-informed decision on when to take profits (enter the market) or cut losses (exit the market).

3. Pattern and Trend Recognition: With a good knowledge of the financial market, a technical analyst can easily identify trends in the market. Finding if an asset is in an uptrend, downtrend, or sideways trend, is not much of a task for them. This way, traders can accordingly align their strategies with the ongoing market direction. Chart pattern recognition includes head and shoulders, double tops and bottoms, and triangles, to name a few, which all help in recognizing these patterns and provide insights into impending trend reversals or prolongations.

4. Short-Term Trading: For traders who want to bank on short-term price movements, Technical Analysis is their cup of tea as it is applied to short-term trading only. For example, intraday traders and swing traders, usually find TA tools quite useful to identify and make the most of opportunities within shorter time frames. The less the time, the more exciting they find it.

5. Psychological Insights: There is no lack of charts and technical indicators that don’t give a sneak peek into market sentiment and investor psychology. There are numerous indicators that help traders analyse and assume which stance to take in such and such situation. For example on-balance volume (OBV), accumulation/distribution (A/D), open interest, etc.


To learn everything about Technical Analysis and how it can make a difference in your trading and investment techniques, get enrolled in online classes at Logical Nivesh Academy where our SEBI-Certified Research Analyst will guide you through the lanes of stock market trading.

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