Humble pranams at thy lotus feet

use and misuse of Technical analysis

Technical analysis

It is a method of analyzing a stocks future price movements by studying the past price and volume data.

The basis of technical analysis: Price discounts everything Price movements are not totally random What is more important than why

Assumptions of technical analysis

Market discounts everything

Price moves in trends History tends to repeat itself

Use of technical analysis

Not just for stocks Focus on price Supply, demand and price action Timing the buy and sell Helps in controlling risks Mainly used by traders

misuse of technical analysis

Analyst bias Open to interpretation Too late Each securities will have different tools as the best tool

Challenges in technical analysis

It works on Pareto principle(psychological and logical)

Technical analysis focuses directly on the bottom line: What is the price? Where has it been? Where is it going?

Challenges in technical analysis (cont.)

More art than a science Each investor should use only that which suits his or her style. Developing a style takes time, effort and dedication, but the rewards can be significant.

Charts
Line Chart

Charts (cont)
Bar chart

Charts (cont)
candlesticks

Charts (cont)

Hammer Hanging man Shooting star and inverted hammer Bullish engulfing Bearish engulfing Piercing Bearish Harami Bullish Harami Morning star Doji

Patterns
Support and Resistance

Patterns (cont)
Head and shoulders

Patterns (cont)
Double top Double bottom Triple top Rounded top and bottom Gaps

Gaps

Gaps (cont)

Gaps (cont)

Gaps (cont)

Indicators
Leading

indicators

Commodity Channel Index (CCI) Momentum Relative Strength Index(RSI), Stochastic Oscillator Williams %R.
Lagging

indicators

Moving averages MACD

Indicators (cont)

oscillators
rsi

Oscillators (cont)

Stochastic
MACD Elliott Wave

Oscillators (cont)
Stochastic

Oscillators (cont)
Elliot wave

Oscillators (cont)
Elliot wave

trading

Day Trading
Advantages
Zero Overnight risk Profit in any market direction High leverage High returns

Risk associated
Possibility of large losses Stress Borrowed money Costs involved

Trading Strategies
Setting

stop loss and following it Forget the news, remember the chart Buy at support, sell at resistance The trend is your friend in the last hour Bulls live above the 200 day, bears live below Big volume kills moves

Trading Strategies (cont)

Dont trust others opinions Dont break your rules Dont believe in a company Dont chase the crowd Dont ignore the warning signs

Some quotes in the area of technical analysis

The Trend is your friend until the end when it bends. Anonymous You are buying the stock, not the company The biggest mistake that a fundamental analyst makes is thinking that a stock and a company are the same

Some quotes in the area of technical analysis (Cont)

The biggest mistake that a technical analyst makes is thinking that a stock and a company are different.

Technical analysis deals with probabilities to help the analyst figure out how to act

Thank you