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To determine what worldwide stock markets will do as far as fluctuations in price, involves first determining which school of thought will be utilized regarding the analysis of companies and the investment prospects they pursue. The most widely used school of thought which has proven reliable over multiple decades is the school of fundamental analysis.

Fundamental analysis views not only the financial opportunities of a company, but also the likelihood of accomplishing these goals in respect to their competitors. Technical analysis, on the other hand, has been successful in use, but not very structured or scientific. Thus, the question again arises, what is the connection between stocks and technical analysis?

If you can believe it, technical analysis is simply the studying of past market trends to make a determination as to what the future of the stock’s price is going to be. But, that still doesn’t answer the whole question - what is the whole connection between technical analysis and stocks? More importantly, how can people think they can predict the price of a stock from looking at charts and graphs and not the financial health or condition of a company?

Some of this stems from technical analysis being used by market analysts who can downgrade stock or anticipate higher earnings. Trading stock is influenced not only by the markets daily swings or isolated events, but actually how markets move with time and the fallout from some of these events are cumulative, therefore experienced over time periods.

Therefore, technical analysis makes use of a lot of diverse data, including trading volume charts, old stock quotes, and much more. This data is then in turn used to look at particular issues which help in developing graphs and charts. These then help in determining the length of the impact of a move in a company will endure and also the outcome that it has on stock market trading.

When compared to each other, fundamental analysis and technical analysis of the same stock market gives much different results. Fundamental analysis is considered a long term or \”long\” predictor in markets. Technical analysis is considered a short term or \”short\” predictor in markets.

Technical analysis is much more difficult to explain to the layperson due to the incessantly large amount of jargon involved, much of it to describe shapes in graphs and trend lines that exist. An elbow, or a shoulder, or a host of other terms can all be used to describe the same trend in a graph (in this case, a level market, followed by a steep drop, and another leveling off) which can confuse and put off the typical investor from investing in a company.

In conclusion, the question still remains, \”What’s the connection between technical analysis and stocks?\”, how is it determined and on what basis? How can these tools be used daily and made easier to comprehend. Although, technical analysis is not as accurate and can be very subjective, it has been successful so it makes it hard to dispute that it is still a viable tool used in market analysis.