carao
24-07-2008, 08:07 AM
Technical Analysis Definition:- Technical analysis refers to the study of the action of the market itself. It is simply the observation of individual securities & the overall market based supply & demand. Technical analyst record, usually in chart or graphic form, the actual history of trading( price changes, volume of transactions etc.) in a certain stock & deduce from that pictured history the probable future trend of price
Basic Principles Technical Analysis:- There are three Key principles about technical analysis
1) Everything is Discounted & Reflected in Market Prices :-
Technical Analyst believes that all knowledge, regardless of type fundamental, economic, political, psychological or other), is already reflected in market price.
Price movements are simply the reflection of changes in supply & demand. The technician does not care what are the underlying factors of shifting supply & demand, rather they are interested in what occurs. If demand is greater than supply, prices will increase. on the other hand , if supply is greater than demand , prices will fall.
2) Prices Move in Trends & Trends Persist :-
The supply & demand balance sets a trend in motion. Once in motion, trend remains intact until it ends. For example , if a stock's price is moving up, it will continue its rise until there is a clear reversal. Likewise if a stock is moving down, it will decline until a reversal.
3) Market action is repetitive :-
Certain patterns appear time after time in charts. These patterns have meanings that can be interpreted in terms of probable future price movement. Although not infallible , the odds are in their favor. Human nature is such that it tends to react to similar situations in consistent ways. As a rule, people will act the as they have in the past. Since the stock market is a reflection of the actions of people , analysts study it to determine how people will react under certain conditions and thus, how security price will move. Analysts analyze the recurrence of similar characteristics in an attempt to identify major market tops & bottoms.
Basic Principles Technical Analysis:- There are three Key principles about technical analysis
1) Everything is Discounted & Reflected in Market Prices :-
Technical Analyst believes that all knowledge, regardless of type fundamental, economic, political, psychological or other), is already reflected in market price.
Price movements are simply the reflection of changes in supply & demand. The technician does not care what are the underlying factors of shifting supply & demand, rather they are interested in what occurs. If demand is greater than supply, prices will increase. on the other hand , if supply is greater than demand , prices will fall.
2) Prices Move in Trends & Trends Persist :-
The supply & demand balance sets a trend in motion. Once in motion, trend remains intact until it ends. For example , if a stock's price is moving up, it will continue its rise until there is a clear reversal. Likewise if a stock is moving down, it will decline until a reversal.
3) Market action is repetitive :-
Certain patterns appear time after time in charts. These patterns have meanings that can be interpreted in terms of probable future price movement. Although not infallible , the odds are in their favor. Human nature is such that it tends to react to similar situations in consistent ways. As a rule, people will act the as they have in the past. Since the stock market is a reflection of the actions of people , analysts study it to determine how people will react under certain conditions and thus, how security price will move. Analysts analyze the recurrence of similar characteristics in an attempt to identify major market tops & bottoms.