Without trade, there will be no progressive economy. One of the bases of a progressive
the economy is an active and continuous trade that facilitates the continuous flow of money
around the market. As long as there is an existing trade between two individuals or entities, be it
a commodity or other things that can be purchased or sold to generate profit, the flow of money
around the market will go on and a progressive economy is within easy reach.
In addition, the existence of a market further established a common ground for different trading
activities. Apart from the physical structure or place of trade, the market is considered to be a
systematic process allowing traders to ask and bid, thus helping sellers and bidders to interact
and make various deals. It functions like a voting system wherein the candidates (the sellers)
seek the support of voters (the buyers) by offering their platform of governance (their product
and its market price).
One of the market systems that are very common among traders is the stock market (i.e. New
York Stock Exchange). It is the market for company stock trading and its derivatives. For
individuals outside the trading industry, stock is a term that is difficult to understand. Unlike
other market systems such as the foreign currency exchange market and commodities market
wherein you can easily determine what is being traded (currency and commodities,
respectively), stock creates confusion among non-traders and even to neophyte traders.
In finance, the stock is the capital raised by a certain company or corporation. Such capital is
accumulated through the issuance and release of shares to interested individuals or
organizations. Like in acquiring a pair of a foreign currency or a commodity for revenue, the
acquisition of shares of a company’s stock allows you to partake in the revenues (based on the
percentage of your share ownership) generated by that company.
However, the issuance and distribution of stocks in the market require extensive study and
evaluation. Like the currency or commodities wherein you need to take a position on a certain
deal, there is a right time to distribute stocks in the market to raise more capital for the
company. It is determined through a technical analysis.
Aside from determining the ideal time to distribute stocks on the market, technical analysis is
also used to evaluate securities (the legal right that is awarded by the borrower to a creditor and
often represented by a certificate such as shares of corporate stocks) by analyzing the statistics
produced by the present market activities, volumes, and past market prices. It is done to
forecast price trends in which the stocks could be sold for a profit.
Basically, technical analysis of the stock market is done by studying different charts of
past price action. It includes variables such as the stock’s price, volume, and open interest (the
total number of derivative contracts). In most cases, it only includes the analysis within the
dimensions of the market and not the financial dimension of the company (such as dividends or
cash flows). However, there are also companies that try to combine the fundamental (study of a
company’s financial dimension) and technical analysis.
Even the accuracy of the results is disputed (since it is a predictive method that is based on
price trend assumptions), technical analysis is one of the reliable tools that companies and
stock traders can use for their quest for profitable capital raising and huge revenue generation,
respectively.
