TECHNICAL ANALYSIS
IS
WRITTEN BY UMESH SHARMA
When someone visits a Palmist, he studies the lines in our hand and based on the analysis which he has studied by analyzing the lines in the past will help him to predict the future which means history tends to repeat itself which means that to predict the future one needs to have the past data which is called analysis.
Technical analysis is a method used to predict the future prices on the basis of historical price, volume and open interest Technical analysis can help investors anticipate what is "likely" to happen in coming days, weeks or months Technical analysis is the study of past data to predict the future. The past data which we study will be of price and volume to analyse the future price action.
“STOCK MARKET
FIRE RULES, TOOLS AND STRATEGY ARE GASOLINE TO WIN THE GAME”
ITS IMPORTANCE IN TRADING AND IN THE STOCK MARKET
WHAT IS LAYMAN TRADER PSYCHOLOGY?
"MARKET ALWAYS MOVE ANTICLOCKWISE OF LAYMAN TRADERS"
In stock market trading the fact is that 98% traders lose money and 2% traders make money Trading is a zero-sum game which means 2% of the traders takes away 98% traders’ money. These 2% traders have huge money flow and news flow and in technical language they are called the operators of the market. In short term demand and supply plays an important role compared to fundamental aspects which is the basic essence of trading. When the layman trader (98% of them) enters into the trade on the buy side or sell side based on the news flow created by the market for short term trading the demand/supply created by them is fulfilled by the 2% operator Real Game Begins Now! The price will now move against the 98% layman traders and it will continuously move opposite till the time the entire 98% trader’s capital is wiped out
In the game of Cricket, when a batsman hits the first two balls of a bowler out of the court ‘SIX! SIX!, the bowler psychology changes and instead of trying to bowl him out he tries to finish the next four balls as a DOT. The batsman takes the advantage of this change in emotions and scores more in the same over. Similarly a trader enters into the trade when the market opens to make profit but when he loses money in the first trade due to wrong trade setup than his psychology changes and instead of entering a proper trade setup for making profit he tries to recover his loss which is the change in psychology and behavior which is called emotions.
“Tools, Rules and Strategy is the key to success in Trading in Stock Market”, Stock Market is like a game of Chess”
"There should not be any Emotions when you are in Trading"
WHAT IS THE BASIC ASSUMPTION OF TECHNICAL ANALYSIS?
Price Discounts Everything:
Technical analysts believe that the current price fully reflects all information Because all information is already reflected in the price, it represents the fair value, and should form the basis for analysis.After all, the market price reflects the sum of knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategist, technical analysts, fundamental analysts and many others. Technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market.The market price reflects the sum knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategist, technical analysts, fundamental analysts and many others
Price Movements Are Not Totally Random:
Most technicians agree that prices trend However, most technicians also acknowledge that there are periods when prices do not trend If prices were always random, it would be extremely difficult to make money using technical analysis.A technician believes that it is possible to identify a trend, invest or trade based on the
trend and make money as the trend unfolds
Because technical analysis can be applied to many different time frames, it is possible to spot both shortterm and long-term trends. Most technical trading strategies are based on this assumption. “Trade with the trend” is the basic logic behind technical analysis
WHAT IS MORE IMPORTANT THAN WHY?
A technical analyst knows the price of everything, but the value of nothing? Technicians, as technical analysts are called, are only concerned with two things:
1: What is the current price?
2: What is the history of the price movement?
All of you will agree that the value of any asset is only what someone is willing to pay for it Who needs to know why? By focusing just on price and nothing else, technical analysis represents a direct approach. The price is the final result of the fight between the forces of supply and demand for any tradable instrument The principles of technical analysis are universally applicable. The principles of support, resistance, trend, trading range and other aspects can be applied to any chart Technical analysis can be used for any time horizon; for any marketable instrument like stocks, futures and commodities, fixed-income securities, forex, etc.This may sound easy that we can generate calls by using principle rules, technical analysis is by no means easy. Success requires serious study, dedication and an open mind.
Step by step analysis of any stock or Commodity:
1: Overall Trend
2: Support and Resistance
3: Buying and Selling Pressure
4: Relative StrengthTechnical
“ The effort and toil given in your PRACTICE and training will help a soldier to save his blood when he is in WAR”
