What is technical analysis?

-

Technical analysis

What is technical analysis? 

We all know that the market moves in two directions, either upside or downside. These upside and downside movements are called trends, and to identify these trends we use technical analysis. It involves various patterns and price movements on charts, which help us predict the future movement of any financial instrument by studying the past available data.

 
Technical analysis requires chart study, and one of the best platforms to study charts of any financial security is Tradingview.com. Technical analysis is a very vast field to explore, and you need to invest some time to understand it completely. In trading, technical analysis is your friend, whereas in investing, fundamental analysis is your friend. But, what if we combined these two together? The result will be a deadly combination that will be so effective that you can earn multifold returns out of it.
 
How technical analysis will help you in investing?
 
As we discussed above,
Technical analysis + fundamental analysis = deadly combination
Now, fundamental analysis will help you identify some good quality stocks based on their fundamental balance sheets. But fundamentals don't tell you what the trend of the stock is. Is it in an uptrend or a downtrend? Or what is the best price to buy?

Market trend


Now here comes the important role of technical analysis. Technical charts can help you identify trends, patterns, the volume of transactions that are taking place, and the current sentiment of buyers and sellers in a particular stock.All this data will help us predict the future expected movement of the stock. So, for example, if you find a stock with good fundamentals and its technical chart is showing a positive buying sentiment, you will gain more confidence and can invest fearlessly without any second thought in mind.
 
How to use technical analysis in trading?
 
Trading is a business that involves high risk and high reward at the same time. Trading is purely based on technical analysis, and no fundamental analysis will help you here. There will be very rare days when fundamentals can have an impact on trading, especially because of some news or when companies post their results. But when you do intraday, only the chart is your friend, the rest is all bullshit. You have to buy and sell or sell and buy shares on the same day itself, and for this you have to watch the price action of the stock closely. Price action is nothing but the movement of the live ongoing price that forms a pattern that indicates a buy or sell signal on the basis of which you place your trades in the live market. Now there are many types of charts, such as: line charts, bar charts, candlestick charts, heikin ashi, etc. But the most famous and most used chart type is the candlestick chart.
This is made up of candles, and each candle tells you about the buyer and seller's sentiment. These candles then form a structure and patterns by which we come to know the trend of the market and help us predict the next move. Trading without technical analysis is pure gambling. When you see charts and take trades, you know what you are doing. But when you trade randomly without seeing the charts, which most new traders do in their initial days, they eventually lose their capital and, more than that, they start losing their confidence.
 
Gain the proper knowledge first, and then start trading and investing. Knowledge is power, and those who focus on learning will eventually start earning.
 
So, this was a simple explanation of how technical analysis works and can have a huge positive impact on your stock market journey.
 
Keep Trading. Keep Investing.
 
 
 
 
©️ All Rights Reserved | 2022 Tradersvault
 
Location: India

Comments

Post a Comment

Popular posts from this blog

Types of candlesticks and their significance

-
Image
Technical chart reading is a very powerful skill to have if you dream of becoming a trader and want to survive in this world of stock markets. We all know that chart reading is the most important aspect of technical analysis . So, we go on the internet searching for technical charts and I am sure you all must have come across one common chart, which is the "candlestick chart". This is the most popular chart among all traders and investors. The reasons behind this are that this chart is easy to understand, gives high accuracy trades, allows us to know the trend of the market, tells us about the sentiments of buyers and sellers, and many more. This chart is definitely the best amongst all the other charts. The candlestick chart consists of various candles, each of which has its own significance. Each candle on the chart shows the momentum that occurred at a particular time-frame. This "momentum" is nothing but the buying and selling happening in the marke
Read more

How to start Investing in the Stock Market?

-
Image
One of the best things you can do in this life is invest; it can be in your health, relationships, education, businesses, or most favourite of all, "the stock market." Many people think of investing in the stock market, but very few actually do so. This is because people either don't have the proper knowledge and guidance on how to invest or they have the fear that they will lose all their money in the market. But those who invest create wealth, and this wealth can only be created by taking calculated risk. Without taking any risk, you can't grow your money in the stock market , and neither can you grow in your life. So have the courage to take the risk that will create your wealth because I am going to share some important things with you that will help you take good decisions while investing by keeping your risk low.  So here are 6 important things to kick-start your investing journey: 1. Understand the market The market is a very volati
Read more

Multiple candlestick patterns- Part 2

-
Image
Welcome back, everyone, to Part 2 of Multiple Candlestick Patterns. Today we are going to discuss about five more major candlestick patterns that will help you in your technical analysis. If you haven't read Part 1 of Multiple Candlestick Patterns, you can read it by clicking here👉🏻 Multiple candlestick patterns: Part 1 1. Bullish Harami: A bullish hammer is formed with the combination of two candlesticks. This is a bullish reversal pattern that is formed at the bottom of a downtrend. Here, the first red candle indicates a strong downtrend in the market. The next small green candle is formed, which shows that the bulls are coming back into the game. The second green candle (body and wicks) should be completely within the range of the first red candle; otherwise, it won't be a valid bullish harami. To trade this pattern, there are two entries: Entry 1 : If the next upcoming candle breaks the high of the second green candle, you can enter with a stop-los
Read more