Technical Analysis

• Technical analysis is a method of using stock charts to determine the future direction of stocks. Stock chart software offers a range of technical analysis indicators that help chart readers view stock price and trading volume from different perspectives. Some stock traders make all their decisions based on their reading of the charts, ignoring all other factors, such as company earnings and news events that impact company growth. Many professional stock traders, however, use both chart analysis and fundamental analysis to guide their trade decisions.
  
  

Fundamental Analysis

• Fundamental analysts focus on a range of economic and accounting factors related to the stocks they trade. This includes an examination of company earnings, earnings growth prospects, debt and other factors provided on a corporate balance sheet. They also pay attention to company competitors, government interest rates, economic growth and other similar factors that help assess future price potential for a company.
  
  

Risk Management

• Managing risk is a primary aspect of successful stock trading. It doesn't matter how good you are at picking stocks if one or two bad trades cause you to lose all your money. Any good risk management strategy has one overriding goal: You must make more money when your trade is successful than you lose on trades that are unsuccessful. This can be accomplished in many ways, and most of them involve the use of stop-loss orders. A stop-loss order is an order you place with your broker to sell when the price of a stock you are trading drops below a predetermined level.
  
  

Trading Strategies

• Once you are well versed in analysis methods that help you assess future price potential and you have addressed the need for risk management, you need to develop a system that indicates when to buy and sell. Trading strategies, or systems, are a specific set of rules stock traders follow. A trading system can be complex--based on a large set of algorithms--or it can be as simple as buying when the stock price is at the 50-day moving average. As you spend time learning fundamental and technical analysis, you may encounter various trading systems that could work well for you.