25-08-2017, 09:32 PM
INTRODUCTION OF TECHNICAL ANALYSIS
Introduction Technical Analysis.ppt (Size: 559.5 KB / Downloads: 24)
Definition of Technical Analysis
A method of evaluating securities by relying on the assumption that market data, price, and volume, can help predict future (usually short-term) market trends.
Technical analysis assumes that market psychology influences trading in a way that enables predicting when a stock will rise or fall. It can be applied just as easily to the market as a whole as to an individual stock.
Importance of Technical Analysis
Fundamental Analysis may provide a gauge of the supply/demand situations, P.E ratios, Economic statistics and so forth there is no any psychological component involve in such analysis.
Technical analysis provides the only mechanism to measure “irrational” (emotional) component in the market.
What is Price Fields:
Technical analysis is based almost entirely on the analysis of price and volume.
Open - This is the price of the first trade for the period (e.g., the first trade of the day).
High - This is the highest price that the security traded during the period. It is the point at which there were more sellers than buyers (i.e., there are always sellers willing to sell at higher prices, but the High represents the highest price buyers were willing to pay).
Candle-Sticks Charting:
In the 1600s, the Japanese developed a method of technical analysis to analyze the price of rice contracts. This technique is called candlestick charting.
Candlestick charts display the open, high, low, and closing prices in a format similar to a modern-day bar-chart, but in a manner that extenuates the relationship between the opening and closing prices.
Understanding Types of Markets
Sustained large increase or decrease in price over a significant period of time characterizes a trending market.
A trading (also known as choppy) market is characterized by smaller, insignificant up and down movements in price, with general movement sideways.
A volatile market characterized by sharp jumps in price. This can happen in any period of time.
What is a trading system?
A trading system is a combination of principles and techniques to make trading decisions based on historical tests and observations.
are derived from trading experiences. They are rules that need to followed to avoid making emotional decisions and past mistakes.
are methods used to make trading decisions based on quantifiable data. Fundamental and Technical approaches are the most popular used techniques.