Introduction To Technical Analysis

A BASIC GUIDE TO

TECHNICAL ANALYSIS

A FORECASTING CHALLENGE According to Wikipedia, In finance, technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management.

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10 Most Important Concepts in

Technical Analysis for Beginners Written by Chintan Chheda

References are taken from the course offered at AlphaTrading. Few of the hand picked lessons in technical analysis from classroom workshop and online training are featured in this book which could be your handbook to technical analysis. Comphrensive Collection of lessons from the online classes.

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TECHNICAL ANALYSIS IMPROVES YOUR INVESTINGÂ & TRADING

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WHAT IS TECHNICAL ANALYSIS WRITTEN BY CHINTAN CHHEDA

TECHNICAL ANALYSIS IS THE STUDY OF PAST PRICE MOVEMENTS TO PREDICT THE FUTURE PRICES. TECHNICAL ANALYSIS IS A METHODOLOGY TO LEARN AND UNDERSTAND THE PREVIOUS PRICE MOVEMENTS. TECHNICAL ANALYSTS BELIVE THAT ALL THE INFORMATION IS FREELY AVAILABLE IN THE MARKET AND ALL THE INFORMATION IS FACTORED INTO THE PRICE. TECHNICAL ANALYSIS

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

Concepts in Technical Analysis

the knowledge issue

“They are a reflection of the trend in the hopes, fears, knowledge, optimism, and greed of market participants. The sum of total of these emotions is expressed in the price level, which is, as Garfield Drew noted, “never what they (i.e. stocks) are worth, but what people think they are worth.”

– Martin Pring

The two primary method to analyze securities in the stock market is through Fundamental Analysis and Technical Analysis.

Fundamental analysis is studying the financial statement of the companies to determine the value of the company using various forecasting methods to conclude which is the right price to enter a particular stock.

Technical analysis people assume that the fair value of the stock is already factored into the stock and it uses price movements on the chart to predict the future price of the stock.

Chartists believe that all the information regarding the company is publicly available and all the information available in the stock market are already factored in the stock price

With the help of this one can understand historically how the stock price has moved over a period of time. Based on the past movement of the stock there are various methods, tools, indicators, and techniques one can predict the future price movement of the stock.

In simple words, technical analysis is the prediction of the future price of the stock studying the past prices movements.

It is always debatable if the Technical analysis is a Science or an Art. The fundamentals of technical analysis are derived from a century-old financial data. Some of the techniques are as old as 17th Century.

Technical analysis may look very hard on the outlook but in simple terms, it is a movement of price plotted on a time chart. has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted Editor's Note:series This eBook

by AlphaTrading. Learn more here: https://alphatrading.in

“The illusion of randomness gradually disappears as the skill in chart reading improves.” – John Murphy

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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TECHNICAL ANALYSIS IMPROVES YOUR INVESTINGÂ & TRADING

ASSUMPTION IN TECHNICAL ANALYSIS TECHNICAL ANALYSIS HAS A LOT OF PREMISES BASED ON WHICH THE TECHNICAL ANALYSIS HAS BEEN DEVELOPED. IT IS VERY IMPORTANT THAT YOU FIRST UNDERSTAND THOSE PREMISES TO GET THE MAXIMUM OF THE TECHNICAL ANALYSIS. TECHNICAL ANALYSIS IS THE FORCE BETWEEN THE DEMAND AND SUPPLY IN THE STOCK MARKET.

BY STUDYING THE STOCK MARKET YOU ARE STUDYING THE EFFECT OVER THE CAUSE FOR THE PRICE CHANGE TO KEEP THINGS SIMPLE. TECHNICAL ANALYSIS Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

Concepts in Technical Analysis

the knowledge issue

"If you want to have a better performance than the crowd, you must do things differently from the crowd."

1# Assumption. The stock market has all the information factored into the price. And all the market information is freely available in the stock market.

2# Assumption Technical analysis work only in stocks with high volumes. Illiquid stock or stock with very less trading volumes cannot be predictable.

3# Assumption Stocks which deal with price movement with only demand and supply: fear and greed can be predicted. Stock with “Artificial Price Change” impact the stocks technical analysis and should not be considered for analysis. Especially when the situation arises from dividends, bonus, stock splits and distribution of the stock.

Failing to ignore this vital points would only lead to wrong stock predictions.

4# Assumption News which can have an extreme impact on the price of the stock should not be considered as a good opportunity for investment based on technical analysis. Any political news, natural disaster news, high impact news should be avoided to invest or trade.

5# Assumption There has always been a discussion on technical analysis is an art or science. My question to those who think it is science is, if the technical analysis was since then robot or black box trading, machine learning would have been way successful than others. #6 Assumption Technical analysts believe that history repeats itself.

Recording of various stock prices have been done which has lead to the conclusion that price of the stock that goes up has to come down and then the stock consolidates.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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02 CANDLESTICK CHART

Candlestick chart is the most popular but to take the maximum advantage of the candlestick chart one has to understand how each candlestick works. This is classified into two types one is bullish e.i. when the opening price is lower than the closing price of the stock. And bearish e.i. when the opening price is higher than that of the closing price.

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Concepts in Technical Analysis

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Source: freeonlinetradingeducation The Important Price Fields are as indicated below: Open (O) High (H) Low (L) Close (C)

although there was a link between price and the supply and demand of rice, the markets were strongly influenced by the emotions of traders.

From the above image, it is easy to understand when there are net buyers the stock price is Bullish likewise when there are net sellers the market is bearish.

Wikipedia says A chart that displays the high, low, opening and closing prices for a security for a single day. The wide part of the candlestick is called the "real body" and tells investors whether the closing price was higher or lower than the opening price (black/red if the stock closed lower, white/green if the stock closed higher).

The candlestick techniques we use today originated in the style of technical charting used by the Japanese for over 100 years before the West developed the bar and point-andfigure analysis systems. In the 1700s, a Japanese man named Homma, a trader in the futures market, discovered tha Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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TECHNICAL ANALYSIS IMPROVES YOUR INVESTINGÂ & TRADING

SUPPORT & RESISTANCE IN STOCK MARKET TECHNICAL ANALYSIS SUPPORT AND RESISTANCE IS PRICE LEVELS OR TREND LINES AT WHICH THE PRICE REBOUNDS. IF THE STOCK IS MOVING UPWARDS AND IT REBOUNDS TO LOWERS LEVEL IT IS RESISTANCE. LIKEWISE, IF THE STOCK IS MOVING DOWNWARDS AND REBOUNDS UPWARDS THAN THAT IS A SUPPORT. UNDERSTANDING RIGHT SUPPORT AND RESISTANCE TO THE GIVEN STOCK CAN GIVE YOU LOT OF OPPORTUNITIES TO MAKE MONEY IN STOCK MARKET.

TECHNICAL ANALYSIS Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

Concepts in Technical Analysis

the knowledge issue

"Start using Support and Resistance first with weekly chart and then gradually reduce the time period"

Their names are self-explanatory and self-derived for the purpose they are used. A support price level or trend line is that level where a falling stock price slows down and finds support or lot of buyers in other words.

A resistance price level or trend line is that level where a rising stock price slows down and resists and finds a lot of sellers in other words. The stock price will keep rising until it finds resistance.

Key Support and Resistance help a investor and trader take important positions in the stock market. it also helps to determine the risk involved.

Support and Resistance should first be practiced with larger time horizon and historical charts.

Once you are comfortable with understanding the support and resistance the next aim should be to find out the Key support and resistance. In other words the main support and resistance.

Support and resistance depicts the demand and supply of the stock and the psychology of how the traders and investors react to the stock at certain price point. Independently support and resistance fail to give the expected results.Â

It is always better to use Support and Resistance as complementary and supplementary to your trading and investing decision than independently.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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04 VOLUMES

The only metric that we've discussed so far in this tutorial is the price, but there are other nonprice factors that are equally as important – including volume. Volume is simply the number of shares or contracts that trade over a given period – usually a day.

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VOLUMES? Non Price metric whichshould be given equal importance.

Volumes play a very important role in understanding the value of trend.

Change in trend with higher volumes confirms the trend. Likewise, change in trend with no change in volumes should not be considered as a change in trend.

Trading volumes confirm the momentum in the stock price and confirm the trend or change in trend.

For example, if the stock price is reversing and forming higher tops and higher bottom with high volume this denotes a confirmation in a change in trend and gives confidence to the investor or trader that now there are more people buying the stock and it increases the chances of the stock price moving upward.

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TREND IS YOUR BEST FRIEND

TRENDS A TRENDLINE IS A SIMPLE CHARTING TECHNIQUE WHEREBY A LINE IS ADDED TO A CHART TO REPRESENT THE TREND IN A MARKET OR STOCK. DRAWING A TRENDLINE IS AS SIMPLE AS DRAWING A STRAIGHT LINE THAT CONNECTS LOWER LOWS OR HIGHER HIGHS TO SHOW THE GENERAL TREND DIRECTION.

TECHNICAL ANALYSIS Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

TRENDS? A Trendline is used for identification and confirmation of Trends.

Technical analysis is built on the premise that the stock price move in trends. Technical analysis with candlestick chart help us in drawing the trend line. Never trade against the trend in the stock market. Make stock market trend as your friend. Understand the concept of market trend trading including price patterns, double tops & bottoms, triple tops, triple bottoms, head & shoulders and trading charts.Â

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06 PATTERNS

Chart Pattern are used in Reversal or Continuation signal. Understanding of trendlines, channels, support, resistance, volumes, and candlestick, you have a basic foundation that can be applied to unique technical patterns.

Technical analysts often study stock charts for recurring price patterns.

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Concepts in Technical Analysis

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"Chart pattern is a term of technical analysis used to analyze a stock's price action according to the shape its price chart creates."

Some of the Most Important Patterns Pennant Cup And Handle Ascending Triangle Triple Bottom Channel Rectangle Breakout Saucers Descending Triangle Inverse Head And Shoulders Bullish Symmetric Triangle Rounding Bottom Flag Continuation Double Top Bearish Symmetric Triangle Falling Wedge Head And Shoulders Top Candlesticks can also give clues to price action and the mood of the market towards a certain stock or index.

Stock Pattern are in simple words if the stock moves in a certain ways with a specified outcomes such as increase in volumes, breakout in the price range it is a clear indicator that the stock is going to continue in certain cases and in the rest of the case change it course.

It is a signal for being caution and market wide sentiment. Best example for this is by understanding the difference between the stock price breakout and breakthrough. understanding the benefits and difference between those can go a long way in finding stocks that are very profitable.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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07 GAPS

Change in the price of the derivative between the closing price of the last candle and the opening price of the first candle is called Gap. For example, the closing price of the stock is Rs. 100 and next day the stock open at Rs. 110 it’s a Gap Up. What creates the gap is sudden demand or supply of a certain stock arising due to various reasons. These reasons could be anything from industry news, company related news, results etc.

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Concepts in Technical Analysis

the knowledge issue

"A gap is empty space between one price bar and the next"

Are all the gaps of same types and should be benefited in the same way?

COMPLETE GAP UP COMPLETE GAP DOWN INCOMPLETE GAP UP INCOMPLETE GAP DOWN

Definitely Not! Pattern Gaps Each and every gap has to be analyzed independently and based on that only the decision has to be taken. Price gaps are very important to the investor and trader which signifies at times change the direction. A sudden change is demand and supply balance cause the gap and these could be used as set-up or even as an opportunity to enter an options trade.

Common Gap Breakaway Gap Runaway Gap Measuring Gap Exhaustion Gap Island Reversal Gap

Now to understand and to analyze a Gap for the purpose of trading it is essential for one to understand what type of gap it and-and then how one can use this as an opportunity to execute a trade.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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TREND IS YOUR BEST FRIEND

MOVING AVERAGES A SIMPLE MOVING AVERAGE IS A WIDELY USED INDICATOR IN TECHNICAL ANALYSIS THAT HELPS SMOOTH OUT PRICE ACTION BY FILTERING OUT THE UNWANTED PRICE MOVEMENTS FROM RANDOM PRICE FLUCTUATIONS. IT IS MORE OF A TREND FOLLOWING INDICATOR, PAST PRICE MOVEMENTS REFLECT THE AVERAGES AND HENCE IT IS A LAGGING INDICATOR.

TECHNICAL ANALYSIS Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

Concepts in Technical Analysis

the knowledge issue

"Moving Average is a trend indicator which is an average of closing prices in a time frame that can help identify a trading opportunity."

Moving Average is a trend indicator which is an average of closing prices in a time frame that can help identify a trading opportunity.

It is very simple to use mechanical trend following system. There are number of ways to deploy moving averages to get the best benefit from the indicators.

Golden Crossover is a moving average indicator in which multiple combination of three moving average cross over the shortest one a trading or investing signal has been generated.

In statistics, a moving average is a calculation to analyze data points by creating series of averages of different subsets of the full data set. It is also called a moving mean (MM) or rolling mean and is a type of finite impulse response filter. Variations include: simple, and cumulative, or weighted forms Moving Average is a trend indicator which is an average of closing prices in a time frame that a trader chooses to help identify a trading opportunity.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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09 DOW THEORY The legend of technical analysis, Charles Dow, is the father of what is popularly known as the Dow theory. The Dow Theory was introduced to the world by Charles H. Dow. Many of the aspects in the Technical Analysis are contributed by the Dow theory. Even though the dow theory is aged old all it's principles stand true even today.

The Dow Theory is built on a few beliefs. These are called the Dow Theory tenets.There are Six basic tenets of Dow theory.

Dow considered a trend to have three parts, primary, secondary, and minor, which he compared to the tide, waves, and ripples of the sea

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Concepts in Technical Analysis

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"Market move in Trends and trends have three phases.

Trends are confirmed with volumes and only definitive signal prove they have ended. The stock market index factors in all the news and sub index should confirm the index trends.

#1 Index Discounts every information available in the market. In case of unexpected situations occur the index recalibrates and reflects the accurate value. #2 Index and sub index must confirm each other. The main index, small cap index and mid cap index but confirm each other.

It is not possible that only Main index is bullish and the mid and the small index are bearish. This we can conclude that only looking at the main index one cannot confirm the bullishness or bearishness in the stock market. #3 There are three trends in the stock market The Primary Trend, Secondary Trend and the minor trend. Primary trends lasts few months to years. Secondary lasts few quarters and minor trends from few days to weeks.

#4 Market Trends has three phases Accumulation Phase, Markup Phase & Distribution Phase. Value Investors usually invest in accumulation phase when the fear is the highest and sell during distribution phase when greed is at the highest. #5 Trends don't work independently. Trends are confirmed with volumes. In an uptrend the volume must increase as the price rises and should reduce as the price falls. In a downtrend, volume must increase when the price falls and decrease when the price rises. #6 Trends are not disturbed with market noise. Certain definitive signal should prove that the trends have ended.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

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10 Risk Management & Money

Management Money Management is a concept in Technical analysis which ensures that you have money to carry traders forever. It basically keeps you in funds so that you can trade another day.

Position sizing is an important aspect when it comes to Money Management.

Risk Management is forecasting and evaluation of the trading and investment risks in the stock market in order to avoid or minimize the impact from the risk.

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Concepts in Technical Analysis

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" Money Management is satying always in money. Risk Management is know your Risk and being prepared to manage the same."

Risk Management is the relationship we maintain between the Risk and Return while trading or investing in the stock market. Generally, greater the risk, greater the is the return.

Risk is therefore central to stock markets.

Traders win and lose in the financial markets every day. The difference between successful and not-so-successful traders is understanding and applying a simple risk management strategy.

Good trading isn't about always picking the right stocks, or the right prices. It's as much about managing your risk, and integrating a strong risk management philosophy into your trading strategy.

Money Management ensure that you are in money to trade another day. Â Millions of traders and investors lost money, but quite a few didn't.

Investors who didn't lose it all were either lucky, or good at their game. Money Management is a crucial element of trading the financial markets especially in times of volatility. It is a defensive concept that keeps you in funds You cannot control the markets but you can control your money and your risk on each and every trade that you make.

Understanding the buying power and position sizing is the key to money management.

Editor's Note: This eBook has hand picked concepts from Classroom Workshop and Online Training for Technical Analysis conducted

by AlphaTrading. Learn more here: https://alphatrading.in

Now that you’ve learned how Technical Analysis is a holistic approach of investing or trading to make money in the stock market. You can select the best way that you want to learn technical analysis e.i. through books, workshops and online course.

Whatever you choose, the rewards can be huge-from a 7 figure raise over your lifetime, to an additional income to just replace your salary and enjoy the freedom from earning money through stock market.

I would be more than happy to know your way to earn money in the stock market and start living a wealthier life, I'll offer you some of the best material to succeed in your endevaour.

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A FORECASTING CHALLENGE IS WHAT WE CALL TECHNICAL ANALYSIS. I'M EXCITED TO SHARE ALL MY STRATEGIES AND SYSTEMS WITH YOU. I AM LOOKING FORWARD TO HELPING YOU LIVE A WEALTHY LIFE. Your Friend,

THANK YOU Please Note: I give away most of my material for free. I'm sharing investing and trading systems and fundamental in the stock market for FREE with you because I know that by helping you achieve in Stock Market, you'll want to become a student for life. Congratulations on taking action to make money in the stock market. Wish you Happy Healthy & Wealthy Life