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Technical Analysis for Day Traders

Knowledge of technical analysis is a necessity for anyone entering the day trading arena.

A large majority of a day trader's activity will be based on technical analysis. Technical analysis is based on the premise that securities prices move on trends, and that those trends repeat themselves over time. Therefore, a day trader who can recognize a trend on the charts can determine where prices are most likely to go until some unforeseen event comes along that creates a new trend.

Most day traders, and traders in general, who rely on technical analysis believe that most of the information they need to know to execute successful trades can be found in a security's price. They study a security's past performance and study charts to see if there are any trends or patterns in the price of the security.

Information about a security's price and volume, and other important information, can be displayed on a graphical chart. These plots form patterns that can be analyzed and used to determine when to buy and sell a security. This information can be updated in real time throughout the trading day. There are many different types of charts that a day trader can use in his research, and the most popular include: candlestick charts, bar carts, and line charts.