Technical analysis is a term used for predicting the direction of prices of a stock through the study of past market data, primarily price and volume.
HISTORY
Technical analysis dated back from 17th century in Dutch and French markets. But where as in Asia, technical analysis is said to be developed by Homma Munehisa (Father of candlesticks) of during early 18th century which evolved into the use of candlestick techniques(will be explained later in detail), and is today a technical analysis charting tool.
Later in 20th centaury many technical analyzing tools were developed and many books were written by several technical analysts to forecast the direction of prices of a stock.
The books written by few analyst have played a significant role in doing the analysis which includes In the 1920s and 1930s Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered. These books are a must read for a person who considers serious learning of technical analysis in the later posts I will provide few more books which has helped me but on a fundamental level these books are a must and sufficient.
Pioneers or so called pillars of technical analysis.
1. Dow Jones (known for his famous Dow Theory)
2. Ralph Nelson Elliott (known for his famous Elliot wave theory)
3. William Delbert Gann (also known as W.D.Gann, famous for his Gann fan\Gann wheel
4. Richard Wyckoff (known for his famous Wyckoff chart)
5. Bill Williams(known for his famous volume indicators)
These people has changed the entire scenario of the technical analysis and everyone has their own individual analysis.
The major difference between Fundamental Analysis (FA) and Technical Analysis (TA) is, While fundamental analysts examine earnings, dividends, new products, research and the like, technical analysts examine what investors fear or think about those developments and whether or not investors have the option to back up their opinions; these two concepts are called psych (psychology) and supply/demand(should consider very important in TA). Analysts employ many techniques, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns and market trends in financial markets and attempt to exploit those patterns.
a. Price Pattern
b. Market trend
Price pattern is nothing but in which form it is take the shape….we will discuss different price patterns in detail like head and shoulder double bottom, reversal pattern, cup-handle pattern, rising wedge, falling wedge, Elliot wave etc .
Market Trend can be BULLISH, BEARISH, CONSOLIDATED ( moving steadily ) .these trends are identified using trend lines, support, resistances, indicators like MACD,RSI, Stochastic Oscillator etc.
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