What is Technical analysis in the stock market?
Technical
analysis (TA) evaluates securities by analyzing statistical
patterns and trends in their prices and volumes, rather than focusing on
fundamental factors like earnings, dividends, or economic indicators.
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Key Principles:
1.
Market psychology: Understanding investor sentiment and behavior.
2.
Price action: Analyzing charts to identify patterns and trends.
3.
Historical data: Using past price movements to predict future
performance.
4. Technical
indicators: Utilizing mathematical formulas to identify trends.
Types of Technical Analysis:
1. Chart
patterns: Identifying shapes and patterns in price charts.
2.
Trend analysis: Identifying and following market trends.
3. Momentum
analysis: Evaluating the speed and strength of price movements.
4. Sentiment
analysis: Gauging market sentiment through indicators.
Technical Indicators:
1. Moving
Averages (MA)
2. Relative
Strength Index (RSI)
3.
Bollinger Bands
4. MACD
(Moving Average Convergence Divergence)
5.
Stochastic Oscillator
6.
Fibonacci Retracements
7. Super
Trend
Chart Patterns:
1.
Reversal patterns: Head and shoulders, inverse head and shoulders.
2. Continuation
patterns: Triangles, wedges, flags.
3.
Breakout patterns: Gap, breakout.
Time Frames:
1.
Short-term: Scalp, Intraday
2.
Medium-term: Weekly,
monthly (Swing).
3.
Long-term: Quarterly,
yearly (positional).
Technical Analysis Tools:
1. Charting
software: Trading View, opstra
2.
Technical analysis platforms: sensibull
3.
Broker: Upstock, Angelone, Groww
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Advantages of Technical Analysis
1.
Identifies trends and patterns.
2. Provides
objective analysis.
3. Helps
with risk management.
4. Enhances
trading discipline.
Limitations:
1. Not
foolproof.
2. Requires
experience and skill.
3. Ignores
fundamental factors.
4. Can be
subjective.
GOLDEN STRATEGY
Combining Technical and Fundamental Analysis:
1. Using Technical
Analysis to confirm the fundamental analysis.
2.
Identifying potential entry/exit points.
3.
Monitoring market sentiment.
4. Refining
investment strategies.
Also, Explore👇
What is The Fundamental Analysis of a Stock?
What is the ideology of an investor when he buys a stock
Here are the 5 key steps of fundamental analysis:
How to analyze the balance sheet of a company
How would I read a company's annual report?
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