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Technical Analysis of EquityTechnical Analysis of Equity - Why to go Technical?Technical Analysis is the involvement of past trends and data to predict the stock movements. It is the study of trends, charts, various tools, and many attributes to get the complete analysis of the stock. Some of us can think that is it really required and reliable for equities to work upon the previous year's data where everything was totally different from today, Government, company fundamentals, competition market, etc. You are exactly right but, data plays a very important role in all the sectors, it is the only solution for millions in today's world and everybody of us wants to learn that formulas to do the predictions for the future business growth, sales, stock prices, competitions, etc and that all depends upon the 'numbers' and 'data' available with us. Technical analysis is not only for the traders but it is very much useful in long-term investment as well. It can do wonders if you club Technical Analysis with your fundamental analysis while selecting any company investment. It can guide you for the below dilemmas:
Some principle you should keep in mind before taking action on your technical analysisTechnical analysis is run only based on only near term analysis, which means you can only predict very short term or short term movements correctly with this, Technical analysis is nothing to do with longterm duration. For long-term investors, you can keep on using it to check the potential of the stock on a regular basis. If the technical indicators are showing bearish trend then it is not for longer-term but only for a few days to weeks. For booking profits in the longer-term also you need to check regular updates with respect to technical as well as fundamental. There are various trends, various indicators, charts that we are going to study to understand that it is not that much tough as it seems to be. For traders, technical analysis is the only requirement to work on. According to the market sentiments, it processes the historical data and strains all the useful results which help to forecast even next minute trade. There are a few principles we should always keep in mind before taking Technical analysis into consideration:Market discounts everythingIt is best to assume that on what price you are doing analysis market already digested the current news roaming into the market. We take a recent example of Reliance Industry stock trend on the day of it's AGM, before AGM the price crossed RS 1950 and as soon as AGM starts it starts going down and then it closed in deep red(low) low it is not due to the fact that AGM has not done well but it is due to the all ready factor in the stock price. This is the basic principle of technical analysis. Buy on rumors and sell on the news is very important Price of the stock generally follow the whole market trendPrice of the stock follow the whole market trend in the particular time duration, Means if you are checking the last year story or charts of one company at a particular time and you find negative returns then it would not be sure that it follows the same trend this year because stock captures the whole market trend at first, If the broader market trend is positive then your technical analysis of go shorting may go wrong here. Loves profits, then do not hate your lossesIf you want to earn with technical analysis, then be ready for losses also because there is every possibility that your trade may get reverse due to any insider news floating into the market or any uncontrollable situations that happened suddenly. Technical analysis is only a way to predict or forecast on the basis of trends and historical data but it is not any sure-shot method to earn consistently in the stock market. A best technical analysis also assumes that only 2 trades would be in his favor out of 3. You just have to maintain a favorable trade ratio better than the unfavorable. Daily cannot be a trading dayYou should not be in a daily habit to make the trades, otherwise, it can be very risky for the health of your money. Daily you cannot do the trading in the stock market because for trading you should have a high volatility index, in the sideways market if you took the trades then your trade would do nothing except losing your money The more you sweat in training, the less you bleed in the battlefieldThe biggest mistake people make, that they learn after losing a lot of money, don't strain yourself in battling field, learn, understanding, read charts as much as you can, take virtual trades either online or offline and once you get 90% success rate with your trades then only come to do it with your money. Trading is a gamble, biggest mythMany traders take the trades as a gamble and end up after losing their entire money one day, Trading is based on many indicators and calculations, this is a calculation of data and numbers. If you take the trades with full knowledge and expertise you would never end up your day in the loss. Trading should not be your bread and butterYou should not only depend upon the trading for your daily bread and butter, but you should also always have any other earning source for your family because trading can give you swing profits or losses. If you use it for 1% to 2 % money appreciation then it is good but if you use it as your full-time profession then there could be 50% chances that you would be in trouble one day because of no matters how good your trading skills are but once you start earning you start gaining confidence and forget all the cons attached with it, in spite you put all your money earned till today with the hope to get bigger profits and that could be the end of your trading profession. |
Do you know your investment! Do you know your investment ! Investing is not only about money, but it is also about your emotions and hard work. If your investment is not fruitful and rewarding then you would not be motivated to do more hard work. A good and successful investment is like another earning member in your family who will take up your money, make your money work, and give you long-term returns. Investment is like buying today and consuming tomorrow, with an increase in quality and quantity. In other words, protecting our future and creating wealth. The purpose and meaning of investing can be different from person to person and profession to profession. Like the person earning 50k in a month, would be having a different investment objective, then the person earning 25k. Even their responsibilities would also play a vital role in investing, depending on their conditions, maybe the person earning 25 k is not having any major responsibilities while the person earns 50k
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ReplyDeleteWhen we think to earn with stock market, a lot of things effect the value of day today price of a security,just like health of company it's working, taking loans, pledge of shares, quarterly results as well as reumers also. So we should study fundamental as well as technical , reading charts very well ie when we should purchase or when to exit from it.
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