Technical Analysis of Stocks

Technical Analysis of Stocks

Technical analysis of stocks and trends is the study of historical market data. Technical analysis, as the word suggests, may sound a bit complex to many of us. Just like mathematics and statistics are big aspects of the financial market. Technical analysis is a trading discipline. If explained right, technical analysis is more sought. It is employs to measure investment as well as on determining trading opportunities. This is done through utilizing statistical trend. Once you know that you can easily understand how to do technical analysis of stocks and trends. Let’s begin with the basics of technical analysis. 


What is Technical Analysis?

Technical analysis (in finance) is a methodology for forecasting the direction of prices with the study of past market data including price and volume. However, quantitative analysis and behavioural economics use many of the similar tools of technical analysis.

Technical analysts aim to use past performance to predict future market behaviour. The most common forms used are chart patterns and technical indicators. One day the share price is up and the next day you’ll the price is down. But, over time, if you look the stock price movements, trends, and patterns emerge. 

Breakdown Technical Analysis of Stocks

Let’s breakdown technical analysis of stocks. The technical analysis of stocks has been used for hundreds of years. During an early 17th century, in Europe, Joseph de la Vega adopted technical analysis approach to predict Dutch markets. Similarly, in Asia, Homma Munehisa influence the innovation of candlestick charts. This becomes an incredibly popular technique to identify chart patterns in the West.

The bottom line is that technical analysis is the only method to predict market price. This reflects all the available information that could impact a market. As a result, there’s a need to consider other tools like economic, fundamental, and new development. Because they are previously priced as a dispose of security.

However, the technical analyst believes that the movement of the price is directly related to trends and history tends to repeats itself (when it comes to market).

Types of Technical Analysis

There are two types of technical analysis: chart pattern and technical indicators.

1.Chart patterns: They are in a subjective form of technical analysis where an analyst attempt to identify areas of resistance on the chart, while looking at the specific patterns on the chart. The patterns help in predicting the price movement following a breakdown from a particular time. While a breakdown from this resistance is subject to a significant movement.

2. Technical indicators: It’s a statistical form of technical analysis where an analyst apply several mathematical formulas to prices and volumes. However, moving averages is the most common type of technical indicator, used for spotting trends via smooth price data.

How To Do Technical Analyze of Stocks

In this section, we’ll discuss the technical analysis of the stocks on the basis of the indicators. Further, the technical indicators is classified as: qualitative and quantitative. The qualitative indicators aim to find support and resistance levels. Whereas the quantitative indicators aim to study price patterns in order to identify stock movement (upward or downward trend).

An analyst selects whether to buy stocks or not on the basis of the findings. Conversly, they include moving momentum and average indicators.

Qualitative Analysis

  • Supports and resistance
  • Chart patterns
  • Change in polarity

Quantitative Analysis

  • Identify market trends
  • Momentum indicators
  • Moving Averages

Join Technical Analysis Course

With Institute of Financial Market Courses (IFMC), become an expert at analyzing technical cues. The course will teach you the skills required to capitalize on stock trends like a pro trader. Also, learn techniques to use complex chart analysis and advanced technical indicators.

Read More: Best Technical Analysis Course in Delhi

About the Author

IFMC Institute
IFMC Institute is governed by representatives who act as an IFMCians. We strive to build a culture of continuous learning and industry interactions. IFMC enables stock market professionals to expand their knowledge, stay tuned with emerging knowledge, and upgrade skills to climb a career in stock market. We are committed to producing Stock Market Analyst, Technical Analyst, NSE BSE NCFM NISM certification, Equity Analyst, Research Analyst and other financial market professionals for this upcoming sector. Our team comprises of industry reputed practitioners who bring with them years of experience. They are subject matter experts in imparting stock market training. As well as facilitate lively discussion allowing to share their insight and experience in share market classes. No stock market analyst can challenge IFMCians all over the world. They address complex real-life queries, leading to the creation of innovation. Conversely, preparing students to be thoughtful and effective leaders. Our faculty are not only renowned in the share market trading but also passing their skills through stock market courses.
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