There's nothing more disappointing than thinking you've found a rock solid company in which to invest your money, only to watch them slowly decline into nothingness, or even worse, suddenly lose value altogether while you stand by wondering if your stock certificates are good for making paper airplanes. While you can sign up for stock alerts and spend all day listening to the talking heads on television telling you their thoughts about what the market is going to do, there is no better plan of action than creating your own strategy for chart analysis.

As a new investor, you don't have to be ashamed to admit that you know little to nothing about chart analysis on your own. Simply put, it is an important part of the larger practice of technical analysis, which is a method for evaluating the market by tracking price movements over time, and using the appearance of trends and patterns as a tool for predicting the way that stocks will behave in the future. When executed correctly, technical analysis can enable traders to see into the future, and make decisions about whether to buy or sell their stock, based on the movement that they forecast there.

Chart analysis is the involved task of monitoring the charts for patterns or trends in the price structures of current stocks, including up trends, downtrends, gaps and reversals. Technical analysts base their work on three assumptions, one of which is that history tends to repeat itself over and over, patterns are a great way to use information observed in the past about a certain stock to predict the way that the stock will behave again in the future. Although you can look at weekly or monthly charts, most analysts agree that daily analysis is needed to stay in tune with what the market is doing.

When first starting out with chart analysis, it's important for all beginner analysts to become familiar with two specific types of chart patterns: the reversal and the continuation. True to its name, the emergence of a reversal pattern is an indicator to analysts that the current up or down trend is going to change, and eventually start trending in the opposite direction. A continuation, on the other hand, is reassurance for analysts that although the current trend might be interrupted for the time being, it will eventually resume in the same direction that it was once traveling.