Introduction on how to be a good traders----Part 1

Many Of my visitors are asking me this interesting question -- HOW TO BE A SUCCESSFUL TRADER ?

I assume that most of you have seen these words ,TA(Technical Analysis),and FA(Fundamental Analysis), so right here I would try to explain in simple terms both of these two BIG words in Trading ( applicable to  Stocks, Forex, Commodity, Energy) in this PART 1 on Introduction to Trading

What Is Technical Analysis?

Technical analysis is a security analysis technique that claims the ability to forecast the

future direction of prices through the study of past market data, primarily price and

volume. In its purest form, technical analysis considers only the actual price and volume

behavior of the market or instrument. Technical analysts, sometimes called "chartists",

may employ models and trading rules based on price and volume transformations, such as

the relative strength index, moving averages, regressions, inter-market and intra-market

price correlations, cycles or, classically, through recognition of chart patterns.

Technical analysis stands in distinction to fundamental analysis. Technical analysis

"ignores" the actual nature of the company, market, currency or commodity and is based

solely on "the charts," that is to say price and volume information, whereas fundamental

analysis does look at the actual facts of the company, market, currency or commodity.

For example, any large brokerage, trading group, or financial institution will typically

have both a technical analysis and fundamental analysis team.

Just as there are many investment styles on the fundamental side, there are also many

different types of technical traders. Some rely on chart patterns; others use technical

indicators and oscillators, and most use some combination of the two. In any case,

technical analysts' exclusive use of historical price and volume data is what separates

them from their fundamental counterparts. Unlike fundamental analysts, technical

analysts don't care whether a stock is undervalued - the only thing that matters is a

security's past trading data and what information this data can provide about where the

security might move in the future. ASSUMPTIONS 1. The Market Discounts Everything A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market. 2. Price Moves in Trends In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption. 3. History Tends To Repeat Itself Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves. Not Just for Stocks Technical analysis can be used on any security with historical trading data. This includes stocks, futures and commodities, fixed-income securities, forex, etc. In this write-up,, we'll usually analyze stocks in our examples, but keep in mind that these concepts can be applied to any type of security. In fact, technical analysis is more frequently associated with commodities and forex, where the participants are predominantly traders. Now that you understand the philosophy behind technical analysis, we'll get into explaining how it really works. One of the best ways to understand what technical analysis is (and is not) is to compare it to fundamental analysis. We would continue next......... Happy trading