Technical Analysis

An Introduction

Technical analysts is used to identify price patterns and trends in the markets. By using charting software traders attempt to understand patterns. Technical Analyst (sometime referred as chartist) use various methods and tools to study the price on charts.

There are many different patterns observed and analyzed since years by traders and analyists, Popular Patterns are head and shoulders, double top, reversal patterns, etc. Some use pivot points to trade. There are also indicators e.g. moving averages, MACD, and search formations such as lines of support and resistance, various channels, flags, cup and handle, etc.

Many analysts use indicators, which are based mathematical transformations of price and volume. Indicators are used to determine trends, and and direction of price. There are many different studies and strategies to track the movement of Market looking on some relationship with spot price and future price, Open Interest, Option prices, Implied volatility, call option put option ration, etc.

 
There are also investors in Market, they invest for long term with the help of technical analysis and speculate the future price movements expecting positive returns in the long run with proper risk control using money management techniques.

There are different studies beside the America style of technical analysis by looking Bar Chart. Many analyst and traders follow Japanese candlestick charting, Some use Dow Theory to trade which is simple, Elliott waves theory. there are traders and analyst who just combine different elements and make there own way to analysis. Altogether it varies from person to person for the trade judgment and final decision to follow the different aspects of technical analysis. 

It has been applied and suggested by many market experts to strictly trade mechanical with systematic approach to identify pattern and combine with fundamental analysis.

Fundamental is the study of economical factors of financial markets. It is said every news is discounted in prices before we know it. Some Analyst and traders use technical and fundamental analysis to make their trading decisions.

Know more about technical analysis, read our free technical analysis course.