DELHI, India -- TECHNICAL ANALYSIS INTRODUCTION

Technical Analysis

Technical Analysis is primarily the study of pictorial representation of history of stock or market and the study of trading strategies based on demand and supply of stocks.

Investors adopt two different approaches to equity investment. they may buy socks at certain point of time and simply hold these stocks over the period of time, without restructing their portfolio. Such a passive approach to investment is called the buy and hold policy. Alternatively, the investors may adopt an active investment strategy, constantly evaluating of their holding and reshuffling the stocks they hold this approach requires constant evaluation of the market. It is a well-established fact the stock markets portray cyclical movements similar to business cycles. An investor who is able to identify the turmoil’s in the market would be able to buy at lows and sell at peaks and make substantial gains out of cyclical investments. Technical analysis is primarily useful for the second life i.e. active strategy

Technical analysis is a method of evaluating the market action i.e. the historical price data along with its volumes primarily by using charts and other technical indicators, in order to find out the trend of a particular scrip and forecast future price movements.

Prices and volumes are, therefore, the only two variables to be studied when using technical analysis.

Technical indicators help technicians for further study of price charts and to reach to a much more refined decision. Trend lines, MACD, OBV are some of the technical jargons of some of the technical indicators. Among the various tools and techniques that are available with technical analysts japanese candle stick is very prominent amongst all of them as we will see, the candlestick chart is the most effective way to gauge the sentiments of traders and operators in the markets.

Technical analysis can also be defined as an art of identifying the trend reversal at a very early stage and to take position at the right time in the direction of the reversal to ride the trend until there is evidence enough to suggest that there will again be a change in trend.

At the outset it must be mentioned that technical analysis helps in timing the stock or market and not in selection.

Technical analysis deals more with the psychological component of trading a stock, and is influenced for the most part on emotionalism. The technical analyst is seeking to answer the question how are other traders viewing this stock, and how will that effect the price in the immediate future in essence technical analysis is based on the demand supply situation in the market. If the demand for the scrip commodity is more than the supply the prices will rise and it would be prudent to buy and vice versa.

Technical analysis is research of market dynamics that is done mainly with the help of charts and with the purpose of forecasting future price development. Technical analysis comprises several approaches to the study of price movement which are interconnected in the framework of one harmonious theory.


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