What is Technical Analysis?

Technical analysis is the study of prices and volumes of stock as these are the two variables which can be known and studied in a stock market. It is an analysis since one studies the factors which are computable and available for study based on daily data.

 Technical analysis is a kind of a structured approach towards reading prices and volumes of stocks in the share market. The stock market signals to investors through only these two factors. Thus it is becomes important to know how to analyze and understand what it is saying. This is done through technical analysis of the stock market.

Through the study of volumes and prices one is able to predict the future course of stocks and the share market in general.

What other factors are needed for technical analysis of the stock market?

Stock should be well traded with reasonable volumes over a period of time. There should be no manipulation of the stock by the brokers or other institutions since that will be a false indicator of the strength or weakness of a stock.

Technical analysis of share bazaar assumes that stock market is free and fair and there is no biases mechanism to subvert this process.

Technical analysis applies equally to well traded stocks with high volumes or poorly traded stocks where the trading volumes might pick up for some reason or the other.

Are historical values of the stock and stock market indices important?

Traders and technical analysts have only the past historical data on stocks. This gives a clear pattern and idea as to how to stock reacted to various stimulus in the past and how to anticipate the stocks future movement.

So its very essential that you have long history for you to do a proper analysis using technical data. Very difficult to do Technical analysis on a newly listed stock, because there is no history. So you will have to find out a different way of trying to apply Technical analysis to a newly listed stock as compared to something which has been around 20 years.

What is a trend?

A trend is a direction taken by a stock which one expects to persist. It could be an  up move in a stock or a down move. If an investor believes in a trend in a stock he may stick with the certain trend and make money in the process. A trend is usually  predicted based on historical data and the current volumes and price in a stock.