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1. Established theory on technical analysis, combined with the author’s experience with technical analysis since 1993, shows that there are certain such models which have more impact than others and which are easy to use in practical stock trading.
2. Basically, there are two methods one can use to analyse and predict price developments in a stock market: fundamental analysis and technical analysis.
3. Because of its methodology, technical analysis takes into account all factors that influence the price of a stock, since these are always incorporated into the price.
4. It follows that the technical analyst should have no trouble choosing and evaluating which factors are important for the future price development of a stock.
5. Technical analysis has evolved into a practical and efficient form of stock analysis which can be useful for all investors.
6. The technical method only uses the price and trading volume of a stock to develop price forecasts.
7. The technical analyst can forget about all of these factors and focus on one point: the correct interpretation of the price development.
8. As its name indicates, the fundamental method uses fundamental information to predict the future economic development, which is then used to calculate the expected price development.
9. The reason it is possible to make technical analysis models is that the market repeats itself in a way which creates patterns.
10. Whether a stock's value is determined by economic policy, the business cycle, the company's turnover and profit history, the future competitive situation, or the psychology of the market towards the company or the industry are all of little bearing.
11. This does not, however, imply that technical analysis is an easy task.
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