Many investors trade stocks based on various factors, for example based on a companies financial statements, their leadership/executive team, recent acquisitions and other business attributes. However, another method of trading is based on technical stock analysis. By analyzing a given stock in terms of the securities particular trading pattern, traders determine when to buy, sell or hold. If you have ever wondered what it takes to trade using these methods, there are many ways to get educated.

It is really interesting to see how swing traders, day traders and momentum traders analyze a securities charts (trades made over time plotted in a chart) to make trading decisions. Some of the types of chart patterns that are used to determine when to purchase a security or sell it include the butterfly pattern, letterman pattern, gartley pattern and fibonacci retracement.

For example, the Fibonacci Retracement Pattern is a very popular tool among technical traders and is based on key numbers identified. The pattern is identified by taking two extreme points on a chart and dividing the vertical distance by the key Fibonacci Ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. These ratios can be used to determine critical points that cause a securities price to reverse. The direction of the prior trend is likely to continue once the price of the security has retraced to one of the ratios listed above.

The ABCD pattern is a technical pattern. It sets up by identifying an intermediate high or low. In a uptrend a line is drawn from the intermediate point low to the next high then to the next price correction low. From that second low point a price target or goal is outlined on the chart. The opposite occurs in short candidates.

The Bullish Letterman Pattern counts bar peaks. A trader begins to count from the lowest low. In most instances these peaks end with a peak D or E and then recycle. At peak D or E the price has the highest probability of falling. Although rare, in very strong trending markets a Peak F can be formed. This pattern has the highest probability of working after peak B is reached. A trader enters on a small price decline from Peak A, B, or C.

MACD another type of tool used stands for Moving Average Convergence/Divergence. MACD is a technical indicator used to spot changes in the direction of a trend in a securities price. It measures strength, momentum and duration of the trend. It is a computation of the difference between two exponential moving averages. The moving averages used are 12,26, and 9.

Sound too technical? Not to worry, there are many free sites, youtube videos and other resources that provide educational information and videos that cover trading strategies and show you different chart pattern examples. Just search for technical stock analysis or chart patterns examples And, a number of swing traders offer website newsletter and charting services. They do all the work to analyze the market, provide you with the charts and offer daily trading advice in the way of specific trades you can choose to execute.

While it sure helps to learn from the pros, of course it is wise to spend some time learning the methods yourself. Understand the various chart patterns, follow some traders for awhile, sign up for free membership subscription where you can and be sure to make your own trade decisions! An educated trader is a good trader.

Daniele Chenal is a BPM consultant and entrepreneur. Click to learn more about Technical Stock Analysis and Chart Patterns Examples

Daniele Chenal is a BPM consultant and entrepreneur. Learn more about technical stock analysis from http://www.technicalanalysistrader.com

Author Bio: Daniele Chenal is a BPM consultant and entrepreneur. Click to learn more about Technical Stock Analysis and Chart Patterns Examples

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