In the stock world, there are two approaches to analyzing stocks: fundamental analysis and technical analysis. While fundamental analysis looks at a company’s sales and earnings figures, among other things, technical analysis focuses on historical charts and data. This allows you to draw conclusions about future course and price developments based on recurring patterns.
In an interview with Business Insider, Jörg Scherer, head of technical analysis at Bank HSBC, explains the procedure and important tips for investors. Human psychology and our tendency to repeat mistakes play a crucial role in this.
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But: Technical analysis is no guarantee of quick riches, but a method that should be used in the long term, says Scherer.
Three methods of technical analysis
A key element of technical analysis is identifying trends. Scherer explains that the simplest means of identifying a trend is a Consecutive of rising highs and lows is – an ascending zigzag course is created, so to speak. When both highs and lows come together, expect an uptrend.