Monday, October 5, 2015

Technical Analysis- What's that?

In real life sometimes 'words' are misleading. One such word is here- 'Technical Analysis'. 
I feel there is nothing 'Technical' about 'Technical Analysis'. When you read the word Technical Analysis you feel there is something which involves great Engineering or Science or a Complicated Algorithm.

Here is good a news. There is nothing complicated in Technical Analysis. 
Actually it (Technical Analysis) is study of Market Emotions with the help of Price of Stock and Volumes traded (quantity bought and sold). I feel it should be renamed to Emotion's Analysis.

But we shall go by the name Technical Analysis in this article.....keeping aside what I feel.

So Technical Analysis is study of Price and Volumes of a stocks or Index or Future or Options or anything that is trad-able. Price is plotted on chart either in form of a line or candlesticks or bars (more on candlesticks and bars later). This price chart gives us the price movement of a stock since it is listed on stock exchange.

Technical Analysis works or believes in following principles:
1. Stocks move in trends - Uptrend, Downtrend and Sideways (Neutral) Trend
2. Trend continues till its important Support or Resistance is not broken (More on Support and Resistance later)
3. Volumes are important to confirm the trend
4. Earlier Price movements (patterns) are repeated in future
5. Emotions, News can be seen on charts with the help of price movement and volumes

Technical Analysis is like Compass that shows direction when you are lost in jungle. Charts in Technical Analysis helps in identifying where the stock is currently trading as compared to its High Price and Low price.

Support and Resistance on chart help in making Buying and Selling decision with less risk high profit potential.

Later, any other tools known as Indicators, Oscillators, Moving Average are developed. These tools support decisions taken based on Price and Volume.

I have designed a course in Stock Market and Technical Analysis for those who are starting new in stock markets. I coach my students on all aspects of Technical Analysis and how to trade markets using Technical Analysis.

Technical Analysis can be applied to any stock, Index or any market such as Commodity or Currency.

There is growing population which is using Technical Analysis to trade the markets.

No comments:

Post a Comment