What is Technical Analysis How to do Market Analysis?

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WHAT IS TECHNICAL ANALYSIS

Market analysis is mainly divided into fundamental analysis and technical analysis. Technical analysis is done especially for short term trading in the stock market. With the help of technical analysis, one can analyze share price movements, trends, trading volume etc.
Technical analysis is used (as compared to fundamental analysis) to easily understand the movements of the financial market. It is a method of predicting the direction of financial market prices based on historical volume and price movement data. Through this, based on the old data, one can forecast the movement of the stock. Can analyze stock volatility charts.

Fundamentals vs Technical Analysis

Technical analysis focuses more on historical data. In technical analysis, one can evaluate the stock’s trend on the basis of historical price and volume data. Whereas, in fundamental analysis, a company’s financial statements, business model, management capabilities, etc. have to be studied. The biggest purpose of doing fundamental analysis is to predict in advance for investing in any company for a long time.

Technical analysis is considered better for short term investors or traders and fundamental analysis for long term investors. With the help of price and volume, you can make the right decision of entry and exit for the long term. Technical analysis also helps you in investing in the long term. On the other hand, to invest for the short term, you can study only technical analysis. Let us now know about some more basic related to technical analysis.

TECHNICAL ANALYST’S TOOLBOX

Technical Analysis Chart

Bar charts, candlestick charts, line charts or point and figure charts, etc. are part of a technical analyst’s tool box. Let’s get some basic information about them.

Bar charts, candlestick charts, line charts or point and figure charts, etc. are part of a technical analyst’s tool box. Let’s get some basic information about them.

Bar Chart

Bar Chart is used for the movement of any stock or stock at a particular time, it is the opening, high of any stock or commodity or forex share for some time period (15 minutes, 1 hour, 1 day etc.). Used to know , take, and close. Technical Analysis Bar charts or any other type of chart such as candlestick or line charts are used to show the movement of a stock’s price.

Candlestick Chart

The candlestick chart also shows the price movement in a way like a bar chart. In this also, it is used to know the Opening, High, Low, and Close (OHLC) of a specific time period (15 minutes, 1 hour, 4 hours etc.) of a stock or commodity or forex share. The stock is shown as a bar in a bar chart. Whereas in candlestick chart the share price is shown in the form of candle. Understanding candle stick chart is easier than bar chart or line chart etc. In bullish market the candle is displayed in green and in bearish market the candle is displayed as red. In some software, bear is represented by black candles and bullish by white candles but the meaning of both is same.

Line Chart

Line chart is completely different from bar chart and candle stick chart. In Line Chart like the line in the name itself, a line is shown here to help you gauge the stock price movement. Line charts are not as easily understood as bar charts and candlestick charts. It is a bit difficult to determine the opening, high, low, close (OHLC) through the line chart.

Point And Figure Chart

Point And Figure Chart Bar chart, like candle stick chart, is a charting technique for estimating the volatility of a stock’s price. This technique was introduced by a writer named “Hoyle” in his book in 1898. Therefore it has been included in an old chart technique.
There are two types of figures in this chart technique, zero and cross. Here zero has been used to represent the red ie bearish market. At the same time, the cross is shown green i.e. bullish market.

Basic Terminology Of Technical Analysis

Bull –
Bull means bullish. In the language of the stock market, bull means the movement of the direction of the stock market to go up.

Bear-
Bear means bearish. If the direction of the stock market seems to you that it will go down, then it is called bearish in the language of the stock market.

Intraday –
Intraday traders are also called basically day traders. In this, you have to buy the share after the market is open and sell the share before the market is closed. That is, buying shares today and selling the same shares today is called intraday trading in the stock market.

Swing Trading –
The meaning of swing trading in the stock market is to buy any stock today and hold it for more than one week, and then sell it, it is called swing trading in the stock market.

Postional Trading –
The meaning of postional trading in the stock market is that today buying any stock and holding it for one or more than three months and then selling it is called positional trading in the stock market.

Short Term Trading –

Short term trading means in the stock market that today buying any stock and holding it for three or more than twelve months and then selling it is called short term trading in the stock market.

Assumptions In Technical Analysis

1. Market price includes everything-

In this it is believed that the information or news related to any stock gets included in the share price. For example, a shareholder receives such information that the company’s upcoming results are going to be good in the next month. So he quietly buys that share. But a good technical analyst understands the same information from the movement of the stock. This is because its effect starts showing on the share price.

2. The share price moves on a trend-

In technical analysis, it is assumed that the price of any stock goes up and down with the trend and pattern. If understood in simple language, it means that in technical analysis, the reason for the rise and fall in the price of the stock is the trend and pattern.

3. Market price repeats history-

In technical analysis, it is believed that the stock definitely repeats its past move. That is, from where the stock had risen in the past, perhaps in the present too the price of the stock may bounce again from the same place. If the market has come in the market in the past, then it is believed that in the present also the market price may fall again from the same place.
This is because market participants are mostly giving the same kind of response. That’s why it is said that the stock price repeats its movement the way it did in history.

what have you learned

Today in this article you have got basic information about Technical Analysis. In this article you read what is Technical Analysis? How many types of charts are there in technical analysis and also what is assumed while doing technical analysis.

I hope you have understood about Technical Analysis. Stay connected with us to learn more such technical analysis.


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