Technical Analysis

Technical Analysis Basics

Technical Analysis is the study of price. Either you study the price only or indicators derived from price. The whole premise of TA is to identify repeating patterns and the conditions under which they appear. And then be on the look out for them and enter trades when the market sets up rightly. This area is probably the most elaborate in trading. A lot of research have gone into this field. Also the behavioral aspects of traders go into formation of these patterns. Volume also plays an integral role in analyzing the markets.

Technical Analysis Charts

There are various chart types that are popular. Some of the favorites of traders are – candlestick, bar (OHLC), heiken ashi, point and figure, market profile, order flow, etc. There are as many analysis methods as there are chart types. Now add to it that the time frame for these charts vary from trader to trader. For instance, a day trader may use 3 or 5 min charts, swing trader may use hourly charts. Investor on the other hand may only trade off daily and weekly charts. All this creates a vast array of combinations of chart types time frames, sometimes overwhelming for a beginner. But a good technical analysis software can make things easy.

Technical Analysis Charts

Volume Profile Head and Shoulders

What is Technical Analysis of Stock Market?

Technical analysis of stock markets is applying various TA tools and indicators for the purpose of understanding the market action. And possibly try to anticipate what the markets may do in near future. Mostly it is used to make the assessment of supply and demand factors in markets. Since financial markets are the richest source of data all technical tools, statistical and mathematical tools are applied to analyse it.

Technical Analysis Chart Patterns

Technical analysis primarily relies on spotting of recurring patterns in both prices as well as indicators. Some popular price patterns are triangles, flags and pennants, wedges, head and shoulders, rounding tops and bottoms. Advanced patterns like harmonic patterns like bats, gartley, etc, Elliott Waves, et all. And patterns on indicators consists of divergences, hidden divergences, HH-HL and LH-LL patterns, etc. Traders also use Trend lines and channels, moving averages and bollinger bands, etc widely. View this video presentation on New Perspective On Technical Analysis.

Technical Analysis Chart Patterns

What are Technical Analysis Indicators?

Technical analysis indicator are derivatives of price. The simplest is the moving average which plots the average of the fixed no of days on a price chart. It assesses the prevailing trend of the markets. For eg, above a moving average is up trend and below it a down trend. Some popular indicators are RSI (Relative Strength Index), Stochastics, Moving Average Convergence Divergence (MACD), Williams %R, etc. Some indicators use volume as their base like, On Balance Volume (OBV), Accumulation Distribution, McClellan Oscilator, etc. Other popular indicators include Advance Decline ratio, Tick Indicator, etc.

Technical Analysis Indicators

Nifty and Bank Nifty Technical Analysis

Both Nifty and Bank Nifty are leading indices of NSE exchange. Where Nifty tracks top 50 stocks based on free float capitalization method. Bank Nifty is comprised of leading banks both private and PSU. These indices track the broad market and gives the idea about the general health of the stock market as well as economy. Both these indices are very popular in India, especially in Futures and option segment. There has been great interest from the retail traders to use technical analysis in their trading. We use Market Profile Charts, Order Flow Charts and VSA Charts to analyse markets. See our Daily Analysis of Nifty and Bank Nifty.

 

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