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Technical Analysis Presentation Transcript
1.TECHNICAL ANALYSIS
2.Definition
The analysis comprising of techniques that make use of historical security price data to forecast the future price of securities is called Technical analysis…..
The analysis comprising of techniques that make use of historical security price data to forecast the future price of securities is called Technical analysis…..
3.TA is to follow a trend.
TA is not a certainty, it is a probability.
TA is a combination of Art and Science.
TA is working on concept “History repeats itself”.
TA is based on Dow Theory.
Mr. Dow said that
”Always follow the trend, don’t fight with trend because trend is your best friend. ”
TA is not a certainty, it is a probability.
TA is a combination of Art and Science.
TA is working on concept “History repeats itself”.
TA is based on Dow Theory.
Mr. Dow said that
”Always follow the trend, don’t fight with trend because trend is your best friend. ”
4.Line chart
Closing prices formation is depend on different time period.
Bar chart
Represents a day’s trading showing the lowest to highest price, open & close.
Candlesticks chart (Rise traders)
Represents difference b/w open & closing prices
Black for bearish trend
White for bullish trend
Closing prices formation is depend on different time period.
Bar chart
Represents a day’s trading showing the lowest to highest price, open & close.
Candlesticks chart (Rise traders)
Represents difference b/w open & closing prices
Black for bearish trend
White for bullish trend
5.Time Period Charts
Read on 3 ways:
Intraday (same day)
Charts are of 5 min, 10 min, 15 min, 30 min, 60 min.
Swing (up to 90 days)
Charts are of daily, weekly, monthly.
Investment (more than 90 days)
Charts are of monthly and yearly.
Read on 3 ways:
Intraday (same day)
Charts are of 5 min, 10 min, 15 min, 30 min, 60 min.
Swing (up to 90 days)
Charts are of daily, weekly, monthly.
Investment (more than 90 days)
Charts are of monthly and yearly.
6.Dow Theory
Daily closing price reflects the psychology of all players involved in a particular marketplace.
The goal of the theory is to determine changes in the major trends or movements of the market.
Daily closing price reflects the psychology of all players involved in a particular marketplace.
The goal of the theory is to determine changes in the major trends or movements of the market.
7.Primary Trend: The primary trend is the long term trend that takes the entire market either up or down. It will have average period of at least 18 months.
Secondary Trend: it occurs with primary trend. It is also known as secondary reaction as it acts as a restraining force on the primary trend. It last from several weeks to a few months.
Bullish Trend: having three phases
Bearish Trend: having three phases
Secondary Trend: it occurs with primary trend. It is also known as secondary reaction as it acts as a restraining force on the primary trend. It last from several weeks to a few months.
Bullish Trend: having three phases
Bearish Trend: having three phases
8.Types of Trend
Up trend
Successively higher highs and higher lows.
Down trend
Successively lower highs and lower lows.
Sideways channel
Highs and lows don’t Successively rise or fall.
Up trend
Successively higher highs and higher lows.
Down trend
Successively lower highs and lower lows.
Sideways channel
Highs and lows don’t Successively rise or fall.
9.Levels
Support Level: when the price/index is on a falling trend, it reaches a low and then rebounds. This lowest value is known as the support level.
Resistance Level: when the price/index is on a upward trend, it reaches a high and then comes down. This highest value is known as the resistance level.
Support Level: when the price/index is on a falling trend, it reaches a low and then rebounds. This lowest value is known as the support level.
Resistance Level: when the price/index is on a upward trend, it reaches a high and then comes down. This highest value is known as the resistance level.
10.Chart Patterns
Bearish in nature
Head & Shoulders
Double tops
Triple tops
Bullish in nature
Inverse Head and Shoulders
Double bottoms
Bearish in nature
Head & Shoulders
Double tops
Triple tops
Bullish in nature
Inverse Head and Shoulders
Double bottoms
11.Lagging Indicators
Moving average line
SAR (stop and reverse)
Bollinger band
ADX
Moving average line
SAR (stop and reverse)
Bollinger band
ADX
12.Moving Average Line
It is formed by calculating and connect all averages of last 5 days closing prices.
Here breakout signals are identify on the basis of closing prices in the market.
It is formed by calculating and connect all averages of last 5 days closing prices.
Here breakout signals are identify on the basis of closing prices in the market.
13.Moving averages line on charts
14.Leading Indicators
MACD (Moving average Convergence and Divergence)
RSI (Relative Strength Index)
RSI = 100 – [100/(1+RS)]
Where RS = Average gain per day/ average loss per day
RSA (Relative Strength Analysis)
MACD (Moving average Convergence and Divergence)
RSI (Relative Strength Index)
RSI = 100 – [100/(1+RS)]
Where RS = Average gain per day/ average loss per day
RSA (Relative Strength Analysis)
15.Trendlines
Upward trend/Support line
Connect two bottoms of a rally from lower low to higher low.
Downward trend/Resistance line
Connect two tops of a rally from higher high to lower high.
Horizontal trend
Connect two equal tops and bottoms of a rally.
Upward trend/Support line
Connect two bottoms of a rally from lower low to higher low.
Downward trend/Resistance line
Connect two tops of a rally from higher high to lower high.
Horizontal trend
Connect two equal tops and bottoms of a rally.
16.Standard Error Channel
SEC are calculated by plotting two parallel lines above and below an x-period linear regression trend line.
SEC can be used to enhance several types of TA techniques.
Validate support/resistance breakouts.
Validate overbought/oversold signals
Validate candlesticks patterns
17.Market Indicators
Breadth of the Market
New highs and New Lows cumulative indicators
Short selling
Mutual Fund Activity
SEC are calculated by plotting two parallel lines above and below an x-period linear regression trend line.
SEC can be used to enhance several types of TA techniques.
Validate support/resistance breakouts.
Validate overbought/oversold signals
Validate candlesticks patterns
17.Market Indicators
Breadth of the Market
New highs and New Lows cumulative indicators
Short selling
Mutual Fund Activity
18.Elliott Wave Theory
He says “that all cycles occurring in nature had the capability of repeating their cyclic pattern indefinitely.
The nature cycle also exhibit an extraordinary numerical relationship discovered by Fibonacci
Fibonacci Formulated a series of numbers
1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 etc.
He says “that all cycles occurring in nature had the capability of repeating their cyclic pattern indefinitely.
The nature cycle also exhibit an extraordinary numerical relationship discovered by Fibonacci
Fibonacci Formulated a series of numbers
1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 etc.
19.He published a series of articles in the year 1939 in which he brought out his observation that in a period of 80 years.
Lets draw the Elliott wave – I , II
Lets draw the Elliott wave – I , II
20.Divide your risk capital in 10 equal parts.
Come prepared with a trading plan.
Trade only in active & high volume stocks/futures.
Don’t trade if you are not clear.
Never do cost averaging, always do value averaging.
Don’t follow a blind man’s advice.
When you lose don’t blame it on luck.
Trade in 2 to 4 stocks at a time with strict stop loss.
Come prepared with a trading plan.
Trade only in active & high volume stocks/futures.
Don’t trade if you are not clear.
Never do cost averaging, always do value averaging.
Don’t follow a blind man’s advice.
When you lose don’t blame it on luck.
Trade in 2 to 4 stocks at a time with strict stop loss.
21.Maintain Discipline During Trading
Constant volume.
Consistency/continuity.(upto 50 trade)
Over trading.
Constant volume.
Consistency/continuity.(upto 50 trade)
Over trading.
22.Limitations of TA
While charts used in TA are fascinating to look at, interpreting them correctly is a very difficult proposition and requires a lot of exposure.
TA once gave a good result may not give it again based on the same pattern
The tools available in TA are less precise and highly subjective in nature. Hence accuracy may not be possible.
The changes in the market behavior observed and studied by TA may not be always reliable.
While charts used in TA are fascinating to look at, interpreting them correctly is a very difficult proposition and requires a lot of exposure.
TA once gave a good result may not give it again based on the same pattern
The tools available in TA are less precise and highly subjective in nature. Hence accuracy may not be possible.
The changes in the market behavior observed and studied by TA may not be always reliable.
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