madhansurya
12-10-2007, 11:10 PM
Dear Friends
Hope this will make you understand about technical analysis to some small extent.
Send feedback Please. (IMP: Moving averages is posted in articles topic in the forum.)
Stock charts gained popularity in the late 19th Century from the writings of Charles H. Dow in the Wall Street Journal. His comments, later known as "Dow Theory", alleged that markets move in all kinds of measurable trends and that these trends could be deciphered and predicted in the price movement seen on all charts.
FUNDAMENTAL ANALYSIS seeks to determine future stock price by understanding and measuring the objective "value" of an equity. The study of stock charts, known as TECHNICAL ANALYSIS, believes that the past action of the market itself will determine the future course of prices.
A stock chart is a simple two-axis (x-y) plotted graph of price and time. Each individual equity, market and index listed on a public exchange has a chart that illustrates this movement of price over time. Individual data plots for charts can be made using the CLOSING price for each day. The plots are connected together in a single line, creating the graph. Also, a combination of the OPENING, CLOSING, HIGH and/or LOW prices for that market session can be used for the data plots. This second type of data is called a PRICE BAR. Individual price bars are then overlaid onto the graph, creating a dense visual display of stock movement.
Stock charts can be created in many different time frames. Mutual fund holders use monthly charts in which each individual data plot consists of a single month of activity. Day traders use 1 minute and 5 minute stock charts to make quick buy and sell decisions. The most common type of stock chart is the daily plot, showing a single complete market session for each unit.
A stock chart is a simple two-axis (x-y) plotted graph of price and time. Each individual equity, market and index listed on a public exchange has a chart that illustrates this movement of price over time. Individual data plots for charts can be made using the CLOSING price for each day. The plots are connected together in a single line, creating the graph. Also, a combination of the OPENING, CLOSING, HIGH and/or LOW prices for that market session can be used for the data plots. This second type of data is called a PRICE BAR. Individual price bars are then overlaid onto the graph, creating a dense visual display of stock movement.
Stock charts can be created in many different time frames. Mutual fund holders use monthly charts in which each individual data plot consists of a single month of activity. Day traders use 1 minute and 5 minute stock charts to make quick buy and sell decisions. The most common type of stock chart is the daily plot, showing a single complete market session for each unit.
Stock charts can be drawn in two different ways. An ARITHMETIC chart has equal vertical distances between each unit of price. A LOGARITHMIC chart is a percentage growth chart. It has equal vertical distances between the same percentages of price growth. For example, a price movement from 10 to 20 is a 100% move. A move from 20 to 40 is also a 100% move. For this reason, the vertical distance from 10 to 20 and the vertical distance from 20 to 40 will be identical on a logarithmic chart.
Stock chart analysis can be applied equally to individual stocks and major indices. Analysts use their technical research on index charts to decide whether the current market is a BULL MARKET or a BEAR MARKET. On individual charts, investors and traders can learn the same thing about their favorite companies.
Use the stock chart to identify the current trend. A trend reflects the average rate of change in a stock's price over time. Trends exist in all time frames and all markets. Day traders can establish the trend of their stocks to within minutes. Long term investors watch trends that persist for many years.
Trends can be classified in three ways: UP, DOWN or RANGEBOUND.
In an uptrend, a stock rallies often with intermediate periods of consolidation or movement against the trend. In doing so, it draws a series of higher highs and higher lows on the stock chart. In an uptrend, there will be a POSITIVE rate of price change over time.
In a downtrend, a stock declines often with intermediate periods of consolidation or movement against the trend. In doing so, it draws a series of lower highs and lower lows on the stock chart. In a downtrend, there will be a NEGATIVE rate of price change over time.
Rangebound price swings back and forth for long periods between easily seen upper and lower limits. There is no apparent direction to the price movement on the stock chart and there will be LITTLE or NO rate of price change.
Trends tend to persist over time. A stock in an uptrend will continue to rise until some change in value or conditions occurs. Declining stocks will continue to fall until some change in value or conditions occurs. Chart readers try to locate TOPS and BOTTOMS, which are those points where a rally or a decline ends. Taking a position near a top or a bottom can be very profitable.
Trends can be measured using TRENDLINES. Very often a straight line can be drawn UNDER three or more pullbacks from rallies or OVER pullbacks from declines. When price bars then return to that trendline, they tend to find SUPPORT or RESISTANCE and bounce off the line in the opposite direction.
A famous quote about trends advises that "The trend is your friend". For traders and investors, this wisdom teaches that you will have more success taking stock positions in the direction of the prevailing trend than against it.
Regards
Madhansurya
Hope this will make you understand about technical analysis to some small extent.
Send feedback Please. (IMP: Moving averages is posted in articles topic in the forum.)
Stock charts gained popularity in the late 19th Century from the writings of Charles H. Dow in the Wall Street Journal. His comments, later known as "Dow Theory", alleged that markets move in all kinds of measurable trends and that these trends could be deciphered and predicted in the price movement seen on all charts.
FUNDAMENTAL ANALYSIS seeks to determine future stock price by understanding and measuring the objective "value" of an equity. The study of stock charts, known as TECHNICAL ANALYSIS, believes that the past action of the market itself will determine the future course of prices.
A stock chart is a simple two-axis (x-y) plotted graph of price and time. Each individual equity, market and index listed on a public exchange has a chart that illustrates this movement of price over time. Individual data plots for charts can be made using the CLOSING price for each day. The plots are connected together in a single line, creating the graph. Also, a combination of the OPENING, CLOSING, HIGH and/or LOW prices for that market session can be used for the data plots. This second type of data is called a PRICE BAR. Individual price bars are then overlaid onto the graph, creating a dense visual display of stock movement.
Stock charts can be created in many different time frames. Mutual fund holders use monthly charts in which each individual data plot consists of a single month of activity. Day traders use 1 minute and 5 minute stock charts to make quick buy and sell decisions. The most common type of stock chart is the daily plot, showing a single complete market session for each unit.
A stock chart is a simple two-axis (x-y) plotted graph of price and time. Each individual equity, market and index listed on a public exchange has a chart that illustrates this movement of price over time. Individual data plots for charts can be made using the CLOSING price for each day. The plots are connected together in a single line, creating the graph. Also, a combination of the OPENING, CLOSING, HIGH and/or LOW prices for that market session can be used for the data plots. This second type of data is called a PRICE BAR. Individual price bars are then overlaid onto the graph, creating a dense visual display of stock movement.
Stock charts can be created in many different time frames. Mutual fund holders use monthly charts in which each individual data plot consists of a single month of activity. Day traders use 1 minute and 5 minute stock charts to make quick buy and sell decisions. The most common type of stock chart is the daily plot, showing a single complete market session for each unit.
Stock charts can be drawn in two different ways. An ARITHMETIC chart has equal vertical distances between each unit of price. A LOGARITHMIC chart is a percentage growth chart. It has equal vertical distances between the same percentages of price growth. For example, a price movement from 10 to 20 is a 100% move. A move from 20 to 40 is also a 100% move. For this reason, the vertical distance from 10 to 20 and the vertical distance from 20 to 40 will be identical on a logarithmic chart.
Stock chart analysis can be applied equally to individual stocks and major indices. Analysts use their technical research on index charts to decide whether the current market is a BULL MARKET or a BEAR MARKET. On individual charts, investors and traders can learn the same thing about their favorite companies.
Use the stock chart to identify the current trend. A trend reflects the average rate of change in a stock's price over time. Trends exist in all time frames and all markets. Day traders can establish the trend of their stocks to within minutes. Long term investors watch trends that persist for many years.
Trends can be classified in three ways: UP, DOWN or RANGEBOUND.
In an uptrend, a stock rallies often with intermediate periods of consolidation or movement against the trend. In doing so, it draws a series of higher highs and higher lows on the stock chart. In an uptrend, there will be a POSITIVE rate of price change over time.
In a downtrend, a stock declines often with intermediate periods of consolidation or movement against the trend. In doing so, it draws a series of lower highs and lower lows on the stock chart. In a downtrend, there will be a NEGATIVE rate of price change over time.
Rangebound price swings back and forth for long periods between easily seen upper and lower limits. There is no apparent direction to the price movement on the stock chart and there will be LITTLE or NO rate of price change.
Trends tend to persist over time. A stock in an uptrend will continue to rise until some change in value or conditions occurs. Declining stocks will continue to fall until some change in value or conditions occurs. Chart readers try to locate TOPS and BOTTOMS, which are those points where a rally or a decline ends. Taking a position near a top or a bottom can be very profitable.
Trends can be measured using TRENDLINES. Very often a straight line can be drawn UNDER three or more pullbacks from rallies or OVER pullbacks from declines. When price bars then return to that trendline, they tend to find SUPPORT or RESISTANCE and bounce off the line in the opposite direction.
A famous quote about trends advises that "The trend is your friend". For traders and investors, this wisdom teaches that you will have more success taking stock positions in the direction of the prevailing trend than against it.
Regards
Madhansurya