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Published byVictoria Ryan Modified over 8 years ago
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Analysis of statistics generated by market activity such as past price and volume to come up with reasonable outcome in future using charts as a primary tool. Should I take a long position? Should I take a short position? What is going to be the price tomorrow, next week or next year? Introduction
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There are practically hundreds of factors that can affect the price and price movements of a particular currency or stock and the study and examination of all these factors together to create a proper prediction of price movements and fluctuations is called Fundamental Analysis. Technical analysis does not concern itself with other factors but rely solely on studying data and charts from past market actions and movements. This makes trading analysis great at analyzing a specific stock or currency's price movement through large time samples. Technical analysis can also follower more markets and market instruments at the same time and produce the results simultaneously. Technical Analysis versus Fundamental Analysis
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The market discounts everything Prices move in trends History tends to repeat itself Assumptions
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Line chart Type of Charts
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Bar Chart Type of Charts
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Volume Bar Chart Type of Charts
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Candlestick Chart Type of Charts
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The meaning of trend in finance isn't all that different from the general definition of the term - a trend is really nothing more than the general direction. A trend represents a consistent change in prices (i.e. a change in investor’s expectations) A trendline is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock. Trends
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Uptrends Types of Trend
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Downtrend Types of Trend
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Sideways Trend Types of Trend
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Support and Resistance Support level is a price level where the price tends to find support as it is going down
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Support and Resistance Resistance Level is a price level where the price tends to find resistance as it is going up
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Importance of Support and Resistance Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing
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Aware: Support and Resistance levels Support and Resistance levels are highly volatile Traders should not buy and sell directly at these points as there may be breakout also
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Breakout The penetration of support and resistance level is called breakout
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Trader’s Remorse Returning to the level of support or resistance after a breakout is called trader’s remorse.
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Trader’s Remorse
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Resistance Support
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Indicators A mathematical tool that can be applied on security’s price giving a result that can be used to anticipate trends, volatility and price Indicators are used in two main ways: to confirm price movement and to form buy and sell signals
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Types of Indicator Lagging This indicator simply tells you what prices are doing, they don’t warn you of upcoming changes Leading This indicators attempt to make investment calls on securities prior to actual price confirmation
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Moving Averages A simple moving average is calculated by taking average of most recent closing prices of n time period Exponential Moving average applies weighting factors which decrease exponentially
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Moving Averages
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Moving Averages Convergence Divergence MACD is calculated by subtracting 26 days moving average from moving average of 12 days
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Trading using MACD A 9 day moving average of MACD is plotted along with MACD
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Elliot Wave Theory Elliot stated that stock market moves in repetitive cycles
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Impulse and Corrective Patterns The impulse pattern consists of five waves, the five waves can be in either direction, up or down Corrective patterns can be grouped into two different categories: Simple Correction( Zig-Zag ) Complex correction (Flat, Irregular, Triangle)
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Fractal Structure The structures Elliott described meet the common definition of a fractal ( self-similar patterns appearing at every degree of trend) Elliott Wave patterns that show up on long term charts are identical to, and will also show up on short term charts
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Fractal Structure
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Fibonacci Retracement Patterns Stocks often pull back or retrace a percentage of the previous move before reversing Retracement percentages follow a Fibonacci ratio pattern, the key Fibonacci ratios are 23.6, 38.2, 50, 61.8
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Fibonacci Retracement Patterns
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Linear Regression Lines When prices are below the Linear Regression Line, this could be viewed as a good time to buy, and when prices are above the Linear Regression Line, a trader might sell
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Linear Regression Channel A Linear Regression trendline shows where equilibrium exists but Linear Regression Channels show the range prices can be expected to deviate from a trendline
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Relative Strength Index It compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset RSI= 100- 100/ (1+RS) RS=EMA[U]/EMA[D] EMA- exponential moving average U= Sig (close (today)-close (yesterday)) D= Sig(close(yesterday)-close(today))
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Relative Strength Index
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Stochastic Oscillator Compares where a security’s price closed relative to its price range over a given time period Fast oscillator Slow oscillator %D = SMA(%K, N)
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Stochastic Oscillator Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level; Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line
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Thank you
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