Well, the answer to the question that “is technical analysis profitable” cannot be in white and black. There are instances where technical analysis can make you earn quick money by predicting future price movements of stocks as well as indices accurately.
At the same time, if you fail to carry out the technical analysis of stocks in the correct manner, you may get misled as well, thereby, ending up losing money!
If you want to try trading in stocks on the basis of analysis, then, first and foremost it is important to know how to do technical analysis of stocks. For this, you should also decide whether you believe in the three basic assumptions on the basis of which stock analysis is done.
The first assumption is that the stock price at any instant of time already reflects all the possible publicly known as well as information about the company and all the microeconomic and macroeconomic factors which can affect the stock price.
And because of this reason, the stock price is not either underpriced or overpriced at any point in time.
The second assumption of technical analysis is that the movements of prices of stocks can be charted and therefore, predicted. It means that the stock prices move in particular trends and one can accurately predict those trends by observing the past price movements.
The final assumption is that history repeats itself which in itself is quite self-explanatory.
In technical analysis, four prices are of utmost importance:
The open price is the price at which a stock or index opens at the start of any trading session.
The high price is the price that has been the highest during the whole trading session.
The low price is the price that has been the lowest during the whole trading session.
The close price is the price at which a stock or index closes at the end of any trading session.
Using these four prices, technical charts are made and patterns are searched in them.
If you want to figure out the fact that is technical analysis profitable for you, then, it is imperative to equip yourself with a lot of knowledge about the various technical indicators.
Furthermore, you will also need to know about how to do technical analysis of stocks using these parameters in the real market in combination so that you may be able to predict the price movements more accurately.
To gain a basic and advanced understanding of technical analysis, you can refer to some of the best technical analysis books like
Getting started in Technical Analysis by Jack Schwager
Technical Analysis of Financial Markets by John J. Murphy
Japanese Candlestick Charting Techniques by Steve Nison
Encyclopedia of Chart Patterns by Thomas Bulkowski
Trading and Technical Analysis Course, By Mandar Jamsandekar
But it is important to remember that no matter how much you have studied and experienced, there always remains a chance to make a loss in the stock market.
For such situations, you should always keep predefined stop losses in every trade you make.
This is to ensure that you don’t make huge losses.
If you are interested in learning technical analysis of stocks, then, you shod definitely think about taking an online course on technical analysis as well as technical indicators and oscillators.