Inexperienced investors almost always have the same opinion of the stock market: it is a chaotic and overwhelming place where there’s no way to know whether you will make money or lose money on a daily basis. While it’s true that there is no way to stop the constant up and down fluctuations of the market, it’s important to point out that there changes are natural, and necessary if there are to be any opportunities to make a profit in the stock market. Making sense of these fluctuations and using them to your advantage depends on your understanding and execution of technical analysis.
Although there are many things about technical analysis that can make it seem complex and mysterious to the untrained eye, its practice is actually based on some simple assumptions that can make sense to even an inexperienced investor. To give you a good idea of the purpose of this type of analysis, it’s important to point out that it is used to evaluate the market and spot opportunities for making purchases and sales in anticipation of price decreases or increases. Technical analysts like to claim that they have developed the ability to see into the future, and while it’s not a failsafe process, it is the best way to make an educated guess about which direction a trend is likely to head.