To those that have never invested in the stock market before, the whole process can seem a bit overwhelming and uncertain.
Not only do you have to figure out how much money you're willing to invest, you have to choose a company worthy of your hard earned funds from among the thousands that are publicly traded on the world's most popular market boards.
Many would-be investors have wished that there was just a way to know which stocks had the most potential for making a profit before they actually make the purchase.
The truth is that what they are wishing for is a simple trading forecast, something that's easy to create if you're familiar with technical analysis.
If you were to ask experienced investors where they turned for their trading forecast, some might tell you that they depend on the advice of a certain stock market expert on television, while others might tell you that they just go with their gut, believing that even if a stock plummets, it will always rise up again eventually (a risky perspective).
However, some people feel more comfortable when they have quantitative data on hand to guide their stock market purchases, which is why so make short term and intermediate traders rely on technical analysis.
While it's not the only method for creating a trading forecast, technical analysis is one of the most reliable ways to make educated predictions about whether a stock is likely to increase or decrease in price.
Technical analysis is based on three simple assumptions: the market is able to adjust for any qualitative factors that might be exerting pressure on price, prices tend to move in trends unless something happens to interrupt them, and lastly, a stock's past movements are likely to repeat themselves in the future.
Using these assumptions to create a dependable trading forecast that you can use to advance your portfolio is a little bit harder that understanding the assumptions on their own.
First of all, you have to become familiar with stock market charts and learn how to spot the trends and patterns that are likely to appear there.
Because technical analysts assume that history will repeat itself, learning to spot familiar patterns is a simple way to predict whether or not a stock's price will continue, reverse, or gap in the future.
It's important to remember that technical analysis isn't a failsafe, and you should still engage in research before you invest in a company.