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What is technical analysis in stock market?
Technical analysis is the study of price action with the help of chart to understand the future movement. Technical analysis believes price is the central force within which all the information known and unknown distilled. Hence the study of price action can tell us the direction of the market. Price is after all the psychological reflection of all the market participant. Price is basically a consensus of values. It is something which are a man pays to the other man for the exchange of a commodity or an asset or a service. It is the negotiation between the buyer and the seller.
What Is Chart?
All the price movement is recorded in a pictorial manner known a chart. A chart is basically a graphical representation of price data. It is a pictorial diagram of the trading history. A chart reflects how the people in the market behaved.
Types Of Charts:-
There are different types of chart
- Bar chart (High-low chart)
- Closing chart or solid chart or line chart
- Japanese candlestick method.
- Renko chart
It is the closing price which is most important among the four. The closing price not only reflects the mood of the traders at the last hour but also it really tells us which section of the traders is the ultimate winner.
If the closing is near the high it is said that the bulls are the winner and they are likely to re-attack next day. If the closing is near the low it tells us that the bears are ultimately winner at the end of the day.
What is the top?
A top is a point or a place in the chart where the upward journey of a price stops and reverses the direction. It is a resistance point. Supply is greater than the demand at this point.
What is a bottom?
A bottom is a point or a place in the chart where the downward journey of a price stops and reverses that direction. It is a support point in the chart. Demand is greater than supply at this point.
Types Of Price:-
There are four types of price at any time frame. They are open, high, low and close. A high price indicates the maximum power of the Bulls and the low price indicates maximum power of bears. The length between the high and the law reflects the gravity of the conflict between the two section of traders. In fact greater the length between the high and the low stronger is the conflict and lesser the length weaker the conflict.
It is the closing price which is most important among the four. The closing price not only reflects the mood of the traders at the last hour but also it really tells us which section of the traders is the ultimate winner.
If the closing is near the high it is said the Bulls are the winner and they are likely to re-attack next day.
If the closing is near the low it tells us that the bears are ultimately winner at the end of the day.