What is Technical Analysis? Beginner's guide to technical analysis Charts

Technical Analysis

What is Technical Analysis? Beginner's guide to technical analysis Charts

Hello friends, today we will talk about technical analysis. Friends technical analysis is the most accurate, reliable, and popular chart technical analysis today. Friends, technical analysis popularity has grown very rapidly in a few years. According to technical analysis, the past performance of the market gives strong directions for present and future performance.

Technical analysis is a process of determining the value of a share in the future by analyzing the price or volume of the share's past price or by analyzing the share's past tense. Friends, now we have three questions given below:

  1. What is technical analysis?
  2. How does technical analysis work?
  3. Why do we have to learn technical analysis?
Let us first discuss what is technical analysis?

1. What is technical analysis?

Friends, you must have seen the weather news on TV many times, how the weather department will see the current situation of the weather and the trend of wind, how will the weather be in the coming 24 hours and it will rain and said that the weather will be clear, tell it clearly Gives.

Friends, tell you the news of the weather here because technical analysis is also of this type. Technical Analysis You should consider clouds as the trend of candle and wind. Which is a chart in technical analysis which shows the past and present performance of a commodity or company and with the help of technical analysis we can find the future of a commodity or company from the performance of past and present.

As the wind changes, the cloud's position changes. Similarly, in technical analysis, the position of the candle changes, then the market trend also changes. Simply put, the practice of determining the future status of a commodity or company on the basis of a chart is called technical analysis.

Friends, there are mainly 3 types of charts in technical analysis, which are given below:

  1. Line Chart
  2. Bar Chart
  3. Candlestick Chart

1. Line Chart

A Line chart is the easiest type of chart. Below you can see the image of the line chart. The line chart shows the closing price of each day. This means that only the close price but not the high price and low price are shown during the day, hence the credibility of the trader is very low on the line chart.

Line Chart

2. Bar Chart

Bar charts are very famous in technical analysis. Below you can see the image of the bar chart. The highest point of this vertical line shows the day's highest price means that the high price and the lowest point shows the day's lowest price means that the low price. The horizontal line which is on the left side of this line shows the open price there and the horizontal line on the right side shows the close price. In comparison to the line chart, we get more benefit from the bar chart. Because it shows the high, low, open, and close prices of the day.

Bar Chart

3. Candlestick Chart

Candlestick charts are highly used in technical analysis, most traders worldwide use this charting system. It is also known as Japanese Candlestick Charting. In this, high, low, open, and close prices are shown as bar charts.

Candlestick Chart

Friends, now we come to the second question about how technical analysis works.

2. How does technical analysis work?

Suppose you go to some unknown city and you have to go to a particular place and you have to take a car. You have left without taking a map on the unknown path. There is a fear of going. This is how technical analysis works, meaning that in technical analysis the chart works for you in a way that if you invest without practicing the chart, then there are equal to shoot arrows in the dark. In technical analysis, the chart presents the situation in front of you like a picture in every stock.

By this, you can know exactly which side of the stock will be killed, for those who are short-term investors especially, the practice of charts is very important so that it is necessary for the trader of the short black period to know them It is necessary to know where the fall will take support and where the resistance of the boom is, all this information can be obtained from the chart.

The systematic practice of charts, knowing the different levels and trading according to them, will reduce the chances of loss, and the number of profitable trades will increase. So now you must understand how technical analysis works.

Now come to the third question that why we need to learn technical analysis?

3. Why do we have to learn technical analysis?

Think you are the king of a country and the king of the neighboring country attack your country, now you go with your army to fight and your army is 3 times the army of the king of the neighboring country, but your army Does not have weapons to fight. Now if we tried to fight without a weapon on  the battlefield, then we all know very well what the result will be.

In this, you think of the stock market as a battleground and technical analysis as a weapon and your money means that your army is sure to lose by fighting without weapons, in the same way, without gaining knowledge of technical analysis, venturing into the stock market. It is like landing on the battlefield without weapons, no matter how much money you have, without knowing the technical analysis, you will be immersed there.

So the right way to say friends is that going to the stock market without the knowledge of technical analysis means that to go to war land without arms, doing so proves not to be heroic but foolish. Therefore, get as much information as you can about the technical analysis in the stock market, if you lose it, then the fault will not be of the market or anyone else but yours. So, friends, you must have now understood why technical analysis is important for us to learn.

Friends, the first use of technical analysis and technical analysis was discovered by Munehisa Homan, a Japanese businessman. According to him, two main factors of technical analysis are supply and demand based on which charts are made, which is the basis of technical analysis.

Now we understand how supply and demand are the basis of technical analysis. When the supply of an item is low and the demand is high, the price of that item increases, which we call up-trend, and if the demand for an item is low and its supply is high, then the price of that item which we down- Trend says, and if the supply and demand of an item are equal then the price moves in a range, we call it sideways-trend.

Friends, there are three major parts of technical analysis, which are given below:

  1. Candlestick Pattern
  2. Chart Pattern
  3. Technical Indicators

First of all, we understand about candlestick patterns.

1. Candlestick Pattern

Friends, this is the case of Japanese rice trading in Japan at the time of 1700s, at that time there was a businessman whose name was Munehisa Homan. While trading rice for a few years, he realized that one thing did not go his way and he thought that maybe there is not a pattern in the prices that have not been understood to date, and he has changed the prices every day. A few years began to assess them by writing, and they found that the price really follows a pattern.

Which was clearly visible to them in prices, thus giving rise to a chart system which they called candlestick charting. In the early stages, he expressed two types of candles:

  1. Bullish Candlestick
  2. Bearish Candlestick
Bullish candlesticks that exhibit a boom and Bearish candlesticks that exhibit a slowdown.

The Munehisa homane candlestick was named after the candle because most of the candles they made looked very similar to the candle. When Munehisa homane discovered the candlestick charting system in the 1700s, he divided the candles into two colors. Bullish candlestick in white and Bearish candlestick in black.

Divided into white and black, he did over the color of chess pieces because the basic color of chess at that time was white and black which can be seen even today. Friends, it is believed that Munehisa Homan became a very rich man after inventing this system and for this reason, he came to be known as the Father of Candlestick. In a few years, this system spread throughout Japan and also became the most popular system for doing business.

Friends, let me tell you the names of some basic candlestick patterns.

So, friends, this was information about candlestick patterns. So now we understand the second part of technical analysis which is chart pattern.

2. Chart Pattern

Shortly after the discovery of candlestick patterns, Munehisa Homane discovered candlestick chart patterns. Candlestick chart patterns consist of a cluster of candlestick patterns and other common candles. Unlike candlestick patterns, it has no limited candles. It forms a pattern from a group of multiple candles that you would normally find in a group of upward candles, ie The sub-trend and the group of downward candles are known by the name of down-trend.

Candlestick chart patterns have no candle limit nor time, meaning a candlestick chart pattern can be formed in 1 month, can be formed in 6 months, or can also form a pattern over many years. The chart pattern gives the trader directions in which direction the share price is going to go. After the completion of this chart pattern, the price increases or decreases. There are two types of chart patterns in technical analysis.

  1. Reversal Chart Pattern
  2. Continuation Chart Pattern

1. Reversal Chart Pattern

When the pattern indicating a reversal is ready, then the market indicates a reversal after a bullish or bearish trend as if the market is trending faster and a bearish reversal chart becomes bearish, And if the trend of recession is going on and the bullish reversal chart pattern is formed then it indicates an uptrend.

Always keep in mind that after getting this type of indication, other technicals should also be put together so that the volume, MACD, RSI, which indicates reversal with chart pattern, prove to be more helpful and effective in quick decision making. it happens. The result which was seen in most of the chart patterns is replicated in the past, now we know the names of some reversal chart patterns.

  • Head and Shoulders Pattern
  • Rising Wedge Pattern
  • Falling Wedge Pattern
  • Double Bottom Pattern
  • Double Top Pattern
  • Rounding Bottom Pattern
  • etc.

2. Continuation Chart Pattern

Continuation candlesticks are continuation chart patterns that indicate a trend to continue so that if the trend continues, and if the bullish continuation chart turns, then it indicates the continuation of the trend and if the trend of recession is going on And if the Bearish Continuation Chart became a pattern, it would have indicated a slowdown. Now we know the names of some continuation chart patterns.

  • Triangle
  • Symmetrical Triangle
  • Ascending Triangle
  • Descending Triangle
  • Flag Pattern
  • Rectangle Pattern
  • Price Channel
  • Cup and Handle Pattern

In technical analysis, charts invest more with the help of patterns that stay in the market for a longer period, with the view of staying in the market for a few years. Meaning chart patterns are used to invest over a long period of time. Some big investors have said about the chart pattern that when you feel that you have learned everything and now is the time to action, please handle yourself a little bit and go into trading, because you are more valuable than your passion. The capital invested is Friends, this was the chart of the second part of the technical analysis.

3. Technical Indicators

Now we move to the third part of technical analysis which is the technical indicator. The Friends Technical Indicator is instrumental in increasing the accuracy of candlestick patterns and chart patterns and guiding the market trends.

The technical indicator is the most important part of technical analysis. To know about the technical indicator means that it would not be surprising if we say that we have mastered technical analysis. Before you learn about technical indicators, I want to tell you one important thing.

Friends, there are hundreds of technical indicators in technical analysis, almost all of them work at some time but each of them does not always work. If each indicator always worked, then every trader would use it and his basic process related to it would change.

Different indicators work on different stocks at different times. As I told you, there are hundreds of indicators in technical analysis, but it is not necessary to know every indicator used for trading in the market, because if you went to use all the indicators then you will get confused. It is only to get information about those indicators who do most of the work.

I tell you the names of some important indicators used in technical analysis which are important and useful in every way.

  • MACD
  • RSI
  • Bollinger Bands
  • ADX
  • Super Trend
  • Moving Average
  • Stochastic Oscillator

Friends, most of the indicators are divided into two classes.

  1. leading indicator
  2. legging indicators

1. leading indicator

First of all, let us talk about leading indicators. This indicator behaves like its name. Indicators give information about over-bought or over-sold in the market. This indicator is very beneficial for the trader who buys or sells for a short period of time.

These indicators give more trading signals and if the trader does work with awareness, they can earn very good profits. Leading indicators include RSI, Stochastic Oscillator. The main advantage of leading indicators is that there are already indications for buying and selling. Leading indicators This creates more trading signals, which allows for more trading.

When there is a slowdown in the market, the over-sold gives an opportunity to buy and when the market is moving fast, the over-bought gives an opportunity to sell. But one disadvantage of this is that a greater number of signs and earlier signs increase the likelihood of a WIP show, which increases the risk, sometimes increasing the probability of loss.

2. lagging indicators

Now we see the lagging indicator. Laggings indicator This is a trend indicator. These indicators work very well in long-term or long-term manufacturing trends. It cannot predict the future price, but it tells in which direction the market is going. Explain where to take support in a similar fast time.

Every investor can invest in any stock with a healthy mind for the long-term or long-term. Laggings indicators include the moving average and MACD. The biggest advantage of the lagging indicator is that it has the ability to hold the trend.

These indicators work well in a similarly increasing or decreasing market. Very few trading signals are found in these indicators and few are found when we meet them. Those who are lying do not do well in this sluggish stock.

So, friends, these were the three parts of technical analysis, and hopefully, you must have understood the importance of these three. Friends, all three are beneficial because these three work together and you must know about these three.

Advantage of technical analysis

Friends, we now know what are the advantages of technical analysis. Friends, there is no need for you to get into the mathematical complexity of technical analysis because nowadays all kinds of calculations are done on a computer. All the indicators are loaded in all the software that comes for trading, the trader only needs to know about their information and usage.

With the help of trading software, it takes very little time to clarify the technical analysis. The entire system of such technical analysis is made mechanical. With the help of technical analysis, the trader or investors help in making his investment. Technical analysis shows the fundamentals of companies even before this actual event occurs.

All the results of technical analysis and comparing the indicator with the past position are used to estimate the direction of the market price in the coming time. Nowadays, due to the low price of computers available in the market, technical analysis has become very easy to use. Nowadays a lot of good software is available to prepare charts for technical analysis indicators. They prove to be very helpful in giving you directions to buy and sell shares.

Trading using technical analysis is considered a definite task, as it uses stop-loss theory. Using Stop-Loss Theory correctly can give you a very long profit and the biggest advantage is that using this Stop-Loss Theory is very small if you are at a disadvantage.
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