🧐WHAT IS TECHNICAL ANALYSIS??🤔🤔
✍💡TECHNICAL ANALYSIS:
The technical analysis exist in every part of our life. Eg. We see the clouds and predict weather and make the decision to take umbrella or not. This is based on our past performance. This is a part of technical analysis study.
The alternative approach to predict stock price behavior is known as technical analysis. It is frequently used as a supplement rather than as a substitute to fundamental analysis. Technical analysis is based on notion that security prices are determined by the supply of and demand for securities. It uses historical financial data on charts to find meaningful patterns, and using the patterns to predict future prices. Edwards and Magee formulate the basic assumptions Underlying technical analysis:
(1)The interaction of supply and demand determines the market value of the security.
(2) The various factors, both rational and irrational factors, govern the supply and demand of the securities.
(3) Stock price tend to move in trend which persist for an appreciable length of time.
(4) Changes in trend are caused by shifts in supply and demand.
(5) Shifts in supply and demand can be detected sooner or later in charts of market action.
(6) Some chart patterns tend to repeat themselves. However, the fundamental analysis estimates the intrinsic of the stocks/securities.
Basic assumptions of Technical Analysis:
✍Price discounts everything
✍Prices move in trends
✍History repeats itself
✍Volume shows when investors are in and out
Myths Behind Technical Analysis
1. We can't time the markets
Many of you have listen many times that we can't time the markets or cannot anticipate the rise and fall in the markets. This is not a totally myth but neither its is a complete true statement.
The true statement is that we cannot exactly time the markets, but the cycles in long can be time with conviction. The end of a trending move especially the top of uptrend or the bottom of downtrend cannot be spotted easily. Opposite of that the end of correction can timed with most conviction.
2. Technical analysis is applicable only for short term, not for long term
This is a another myth of technical analysis that long term price analysis is not possible in the case of technical analysis. Technical analysis is more effective in a long term trade than a short term. If technicals are applied in shorter time frame than accuracy may reduced than long term weekly, daily or monthly candle charts.
Volitality in a shorter time frame is always more as compared to long term trades. Minites, hourly candle charts are more volatile compared to daily, weekly and monthly charts.
Focus of more on Long term trades or medium term trades rather than intraday or scalping increases the chances of profitability percentage. Long term or medium term positions are more accurate in technical analysis.
VOLUMES
Volume is the total number of shares traded on one side of the transaction. Volume should be kept in check, when you buy a share. Low volume stocks should be avoided.
➡When prices rise, and volume increase it is a positive sign.
➡When prices fall and volume rises, it is a negative sign.
➡When prices rise and volume falls, it indicates that the rally is not very healthy, and some speculation might be going on.
➡️If price falls and volumes are decreasing,it can be positive sign and upmove is possible.
SUPPLY & DEMAND
✍The fundamental basis for technical analysis is that prices shift with supply and demand.
✍If the demand exceeds the Supply, the price will rise. If the supply exceeds the demand, the price will fall.
✍Charts reflect this rise and fall. By studying this movement on a chart and using the technical studies, you can make predictions on which way the price is likely to go.
To trade supply and demand methodology in securities you should:
Buy when the price bounces upwards from a demand area.
Sell when the price bounces downwards from a supply area.
Hold your trade at least until the price action reaches an opposite level on the chart or use price action rules to manage the trade.
TECHNICAL ANALYSIS VIDEO LINK
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