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In fact, technical analysis has become more popular than ever over the last several years. Traders evaluate past price movements to help forecast a securitys future price.

Fundamental analysis, the alternative method of stock evaluation, relies on a stocks intrinsic value and requires a broader understanding of industry conditions and how companies are managed.

But how do investors look at the data, and what exactly are the advantages of technical analysis?

RushTrade, like many other brokers, provides candlestick charting as a technical analysis tool for their traders. Candlestick charts have been used for hundreds of years and are derived from a Japanese version used to analyze the price of rice contracts.

Like a bar chart, the daily candlestick line shows the markets open, high, low and close of a specific day, but also uses color and shading to help clarify the range between the open and close of that days trading.

A big difference between the common bar charts and the Japanese candlestick charts is the relationship between opening and closing prices. Bar charts place more emphasis on the progression of todays closing price from yesterdays close. Candlestick chartists are more interested in the relationship between the closing price and the opening price of the same trading day.

Technical analysis methods work from the assumption that the market is more psychological than logical. Thus, candle patterns are essentially reactions of traders at a particular time in the marketplace. People often react en masse to situations, and this allows candlestick chart analysis to work.