How does Technical Analysis work? Is it good for Trading?
Technical Analysis It means a method of evaluating securities by analyzing statistics generated by market activity, Past prices, Volumes.
1) TA does not attempt to measure intrinsic value.
2) instead look for patterns & indicators on charts to determine future performance.
3) TA focus on price & volume data
Technical Analysis is based on the assumption that security prices move in trend & that those trends are likely to repeat themselves over time.Hence if you can recognize a trend on the charts. You can determine where prices are likely to go to unexpected events happens that create new trends.
Study Based on Three Factors.
1) Focus:- Price & Volume.
2) Data:- charts.
3) Goal :- Trading.
The Field Of Technical Analysis Is Based On Assumptions.
1)The market discount everything.
2)Prices moves in trend.
3)History trend to repeat itself.
4) TA assumes that, at any given time, a stock’s prices reflects everything that has or could affect the company.
Technical Analysis Believes.
1.TAbelieves that securities moves in very predictable trend & patterns.
2.Trend continue until something happens to change the trend.
3.until that change take place, price level are predictable.
What is Technical Analysis Indicators?
TA indicators are mathematical equations that summarize price action.
What Is The Difference Between Technical Analysis & Fundamental Analysis?
|Factors||Fundamental Analysis||Technical Analysis|
|Definition||Value calculated using various economic factors||Uses price movements & patterns on charts to predict future price movements|
|Data form||Economic reports, news events, industry factors||Chart analysis|
|Asset Bought (Sold)||when price falls below (above) intrinsic value||when trader sees a price formation that has a high probability of moving into profit in near future|
|Type of Trader||Usually longer term position traders||Generally swing traders & short term day traders|
|Time Horizon||Often holding for days, weeks, or even months||Can be long, but most take positions for days, minutes, or even seconds|
|Concept Utilized||Report expectations vs actual outcomes,
current news events compared to historical events
|Trendlines, support & resistance (supply & dem&), dow theory, price patterns|