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There are two types of ways to analysis the
price of a stock, fundamental analysis, and technical analysis. Fundamental
analysis is used to gauge the price of a stock based on the fundamental
attributes of the stock, such as price/earnings ratio, Return on invest, and
associated economic statistics.
Technical analysis deals more with the
psychological component of trading a stock, and is influenced for the most
part on emotionalism.
The technical analyst is seeking to answer
the question "how are other traders viewing this stock, and how will that
effect the price in the immediate future".
As you will see, the candlestick chart is the
most effective way to gauge the sentiments of other traders.
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