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Technical Analysis Basics

Technical analysis basics explained for traders, students and investors.

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Technical Analysis Basics

  1. 1. Technical Analysis Basics Rishabh Surana
  2. 2. Definition Technical analysis is a term used for predicting the direction of prices of a stock through the study of past market data, primarily price and volume.
  3. 3. Chart Showing Price History And Volume
  4. 4. History Technical analysis dated back from 17th century in Dutch and French markets. But where as in Asia, technical analysis is said to be developed by Homma Munehisa (Father of candlesticks) during early 18th century which evolved into the use of candlestick techniques(will be explained later in detail), and is today a technical analysis charting tool. Later in 20th centaury many technical analyzing tools were developed and many books were written by several technical analysts to forecast the direction of prices of a stock.
  5. 5. Continued… The books written by few analyst have played a significant role in doing the analysis which includes In the 1920s and 1930s Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered. These books are a must read for a person who considers serious learning of technical analysis.
  6. 6. Pioneers or so called pillars of Technical Analysis… 1. Dow Jones (known for his famous Dow Theory) 2. Ralph Nelson Elliott (known for his famous Elliot wave theory) 3. William Delbert Gann (also known as W.D.Gann, famous for his Gann fanGann wheel 4. Richard Wyckoff (known for his famous Wyckoff chart) 5. Bill Williams(known for his famous volume indicators)
  7. 7. Technical Analysis V/S Fundamental Analysis The major difference between Fundamental Analysis (FA) and Technical Analysis (TA) is, While fundamental analysts examine earnings, dividends, new products, research and the like, technical analysts examine what investors fear or think about those developments and whether or not investors have the option to back up their opinions; these two concepts are called psych (psychology) and supply/demand(should consider very important in TA). Analysts employ many techniques, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns and market trends in financial markets and attempt to exploit those patterns. a. Price Pattern b. Market trend
  8. 8. Candle Stick Explained
  9. 9. Graph Time Resolution Daily - 1 candle = 1 day Useful for analyzing short term trends Weekly - 1 candle = 1 week Useful for analyzing intermediate term trend Monthly - 1 candle = 1 month Useful for analyzing long term trends
  10. 10. Trend – The Direction Of Prices
  11. 11. Golden Rule Of Technical Analysis Trading TRADE WITH TREND
  12. 12. Understanding Support And Resistance
  13. 13. Retracements
  14. 14. Continued…
  15. 15. How Should We Trade
  16. 16. Understanding Good/Bad Trade