Introduction
Hello everyone today I’m going to discuss about technical analysis, how it works, the purpose of technical analysis, and the type of technical analysis. As we know if we don’t have knowledge about technical analysis so we can’t able to take a decision about buying any stock of the company, technical analysis is a systematic approach where we study the chart and identify price trends and volume movement of the company, we will discuss in deep in below paragraph.
What is technical analysis?
Technical analysis is a systematic approach that identifies future trends of the price and volume movement and performance of a company’s stock. Usually, technical analysis is used by short-term traders who want to make money in a short period of time where traders study chart patterns, indicators, and signals and identify price trends and volume movement of a company. It aids investor to make decisions for entering and exiting into company’s stock.
How to use technical analysis. (Types of technical analysis)
A)- Study the company’s chart. B)- Technical indicator. C)-Trend lines.
A)- Study the company’s chart:- This strategy displays the historical price movement and volume trend of any company. Stock market charts are as follows:- 1)- Line chart:- It is also known as a line chart, line plot, or graph it helps to monitor prices currencies, and indexes in the right way. 2)- Bar chart:- A bar chart displays the opening, closing, high, and low prices of any asset or security over a specified period of time. 3)- Candlesticks:- A Candlesticks displays the opening, closing, high, and low prices of any asset or security over a specified period of time.
B)- Technical indicator. Technical indicators like moving average, relative strength (RSI), and Moving average convergence divergence (MACD) are very important tools for identifying price movement and trend. With the help of this technique, traders can take entry and exit from trade effectively, it also indicates selling and buying zones where traders easily identify trades.
C)-Trend lines. Trend analysis displays the strength and direction of price trends. In technical analysis there are three types of trends exist a)- Up trend, downtrend, and sideways trend, it is a very useful technique and it indicates the overall trend of the company’s chart, and the seller easily identifies selling and buying zones effectively with the help of these trends.
Key points
Support and resistance Support and resistance are also useful tools to help investors or traders buy or sell stocks. Support represents a price level at which stocks tend to find buying interest and prevent them from falling further. Resistance represents the power of the seller where sellers are very powerful and preventing the stock from rising higher.
Volume
Volume trading represents the number of shares or contracts traded during a given period of time. It represents market interest and activity, is usually used by traders and analysts to identify future price movement.
Conclusion
Technical analysis is a very useful strategy that every short-term trader uses and with the help of a technical chart traders identify buying and selling opportunities, technical analysis is used when traders identify for short-term trade which defines price movement, volume trading also suggests to the trader when they can take buying and selling opportunity. As we know fundamental analysis explains about quantitative and qualitative aspects of the company and it is used for a long period of time, sometimes technical analysis is good, and sometimes fundamental analysis is effective.
Disclaimer
The information given above is only for educational purposes before making any financial decision kindly take advice from your financial advisor but the information given above is authentic and shared with you after hard work of research, this is also not a buying and selling recommendation and you are liable for your profit and loss and owner of this website is not liable for your loss.