Technical Analysis

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Technical analysis is a term used to define the process of forecasting Future Price movements based on the Past Price movements with the help of the Statistical Charts. It is with the help of Technical Analysis that investors are able to make financial decisions of Buying, Holding, or Selling Stocks.

History of Technical Analysis

Technical analysis as we know it today was first introduced by Mr. Charles Dow who developed well-known Dow Theory in late 1800’s. Several noteworthy researchers including Mr. William P. Hamilton, Mr. Robert Rhea, Mr. Edson Gould and Mr. John Magee further contributed to Dow Theory concepts helping to form its basis.

Importance of Technical Analysis

  • Technical Analysis Indicator’s helps the investor to know when to Enter or Exit a trade, in order to make profit.

  • Technical Analysis Indicator’s looks at Price Information and Translates it into simple, easy-to-read signals.

  • Technical Analysis can be used on any Security with Historical Trading Data. This includes Stocks, Futures, Commodities, Fixed-Income, Currencies, and other securities.

Technical Analysis is based on three main assumptions:

Market discounts everything

Many experts like to criticize Technical Analysis because it only considers Price movements and ignores Fundamental Factors. In fact, Technical Analyst believes that from a Company’s Fundamentals to External Factors,everything is already Priced into the Stock.

Price moves in Trends

Technical Analysts believe that Prices move in Short, Medium, and Long-Term Trend. In other words, a Stock Price is more likely to continue a past trend than move erratically.

History tends to repeat itself

Technical Analysts believe that history tends to repeat itself. The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable based on emotions like fear or excitement.


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