Are you looking to invest in Indian stocks? If you are new to the domain, the first and foremost you need to understand is the quality of data you have. This data may include the latest stock trends, charts, past records, patterns, and others. Since this kind of data is extremely complex, technical analysis of the stocks becomes necessary. But, what does it mean? Technical analysis of stocks can be defined as anticipating or making a prediction about the future show of the stocks. This is done by going through bits and bytes of historical data that is inclusive of market information, volume, and price.
The main objective of doing a technical analysis of stocks is to provide market insights about the stocks of a company. This further helps stock traders and investors in taking appropriate decisions.
Another popular kind of technical analysis is known as fundamental analysis. Though technical analysis is done by going through the historical price patterns of a stock to predict its future price, the fundamental analysis doesn’t pay heed to chart patterns and instead focuses on a company’s economical and financial management that is used to define the future price of the stocks. If you are one of those stock investors who focus on making long-term gains out of your stock investments, fundamental analysis is what you should refer to. On the other hand, technical analysis is useful for investors who have short-term investment objectives.
In any technical analysis, there are different types of assumptions that need to be made. So, below are the descriptions of these assumptions.
- Stock Market Information
As per this assumption, all the elements that can make affect the stock prices have been dismissed in the ongoing scenario. Therefore, it can be easily assumed that the present stock prices are neither not too low not too high even if you are using the best trading platform in India.
- Price Movement Forecast
We all know that stock prices follow no set pattern, yet this theory contradicts that reasoning by claiming that any stock’s price movement can be predicted and charted. This assumption suggests that once you have a solid understanding of the stock market, it will be simple to strategize buying stocks at a lower price and selling them when prices rise with the best stock broker in India.
- Historical Data
Because the stock market trend tends to repeat itself, it is thought that marketers react similarly to stock price swings from time to time, according to this idea.
- Short Period Focus
The most intrinsic objective of technical analysis is to shift the focus to shorter periods. This period can be as short as a month or sometimes even an hour in the case of intraday. Contrary to fundamental research, which persuades stock investors to go with long-term investments, technical analysis highlights fast-tracked stock buying and selling, concentrating on short-term stock investments.
- Charts and Graphs for Stock Price Patterns
In technical analysis, charts and graphs are used to comprehend and read spot price patterns by the best stock broker in India. The value of charts is quite high when it comes to lending help to stock traders during the finding of the shift of price. Graphs and charts are known to help them confirm whether the present stock price will go up or slump.
- Downtrends
Downtrends are market conditions in which stock prices consistently fall. In a declining trend, investors refrain from purchasing stocks and instead wait for prices to increase somewhat before selling off their entire stock portfolio.
- Horizontal trends
Horizontal trends basically refer to chart patterns developed by carving out-trend lines for both high and low prices in a pictorial figure. In this case, the market condition remains unstable and in that case, traders don’t stay confident whether to buy or sell a specific stock.
- Support and Resistance
The definition of actual support in the technical analysis of a stock can be defined as a low moving trend in which investors invest in equities when their prices began to go down. On the other side, resistance means the level at which the stock attains its highest price as traders start to sell and the stock prices start to plunge
- Trade Size
You must maintain a careful eye on the volume of trades if you want to completely examine the movement of the stock trend. The stock trend is considered legal. When there is an increase in volume, a jump in stock price is evident. If there is only a small variation in volume, however, the reason behind can be a setback movement.
- Moving Average Technique
This approach can be taken to anticipate the stock price for a long-term investment. Trend indicators using moving average techniques provide us with a concise and clear picture of the market trend.
- Pointers and Oscillators
Indicators refer the measurements of technical analysis. These are done by analysts who make the use of different mathematical formularies to determine stock prices and volumes. An oscillator can be defined as a technical analysis needle which determines oversold and over purchased equities.
The Conclusion
The goal of technical analysis is to make price predictions. You can try to predict how an instrument should be traded by analysing historical market data. There are various premises in favour of technical analysis’ reliability, all of which are founded on experience and long-term observation.