Technical analysis of the stock market allows us to estimate the balance of forces of "bulls" and "bears" in the current time.Technical analysis was the result of observations by traders for the price chart and identify the rules of behavior generated by analyzing the psychology of the market, a repetition of history, and other factors.
Technical analysis is carried out using all sorts of indicators.Most professional traders make predictions after technical analysis.
Russian securities market is still underdeveloped compared to other markets.The development of the stock market promotes the expansion of financial instruments.Furthermore, there are various types of stock markets.Primary stock market involves the issue and placement of new securities for the first time.Secondary stock market may be organized or unorganized.Stock markets are also classified by territoriality.
Depending on the financial instruments traded trader chooses a broker for access to trading.Forex brokers rating allows us to estimate the number of financial instruments, which is accessed by a particular broker.Brokers have different commission and working conditions.Approach to choosing a broker to trade must be a reason.Forex brokers rating includes comparing brokers on all important aspects of the work.
Differences between fundamental and technical analysis
Fundamental analysis involves the study of the fundamental factors affecting the price at the time of the news and in the long term.The fundamental indicators are: GDP, unemployment, changes in the refinancing rate and so on.
Technical analysis involves the analysis of the price chart using indicators, geometric shapes, lines of support and resistance price.Technical analysis takes into account more fully the psychological aspects of the players on the short and medium term.It is this kind of analysis used by almost all traders, while fundamental analysis is used a few players due to the need to study large amounts of data to generate objective conclusions.
Even after the formation of the conclusions on the basis of fundamental analysis conducted by a trader looking for the most convenient point of entry into the market, using the tools of technical analysis.Many traders for technical analysis using special software.The program for the analysis of the stock market, as a rule, analyzes the signals and identifies the schedule of various indicators.Nevertheless, the majority of traders engaged in the analysis of graphs on their own, without the use of additional software.Technical analysis of the stock market means using the signals of different indicators, while the program gives signals on one or two indicators and do not take into account many other factors such as the output of important news and so forth.
postulates of technical analysis
main functions of the market are as follows:
- concentration of available funds by selling securities;
- to attract investment by organizing the purchase of securities of the company;
- ensuring their high level of liquidity.
Stock Market - the concept is not as abstract as it may seem.For securities that are hosted for sale, are the real economics of organizations that provide jobs and produce goods, works or services, pay taxes.
In the stock market, there are three basic assumptions that professional traders use to build their own trading strategies:
- price takes into account everything.
- price moves directionally.
- History repeats itself.
price takes into account everything.As well as currency, forex, stock market takes into account not only the state of the economy, but also the expectations of traders.Expectations are based on rumors, news and fundamental analysis of the market, as well as insider information.Analyzing the graph, the trader uses his knowledge, information, indicators and other analysis tools to determine the most likely future direction of the price movement.
on price can affect large number of different factors, such as: statements of politicians, natural disaster, waiting for the important news and others. All, absolutely all publicly available information is already included in the price.
price moves directionally.The stock market, as the Forex market, is subject to trends.That is the price never moves erratically.This is supported by the main indicator of technical analysis - trend.
History repeats itself.Psychology of most of the players implies some action scripts that are activated in different situations.It is a repetition of history promotes the release of common rules for the technical analysis of the market.
Technical indicators
Technical analysis of the stock market is performed by construction and use of the following indicators:
- trendline support and resistance levels;
- geometric shapes;
- technical indicators group of oscillators;
- trend technical indicators.
Trendline
If the price moves up or down - such a movement can be called a trend.If the price moves in the lateral direction - it sideways.The trend has several cycles of birth, development and completion.A trader is looking for signs of an emerging trend to enter the market in its direction.Exit from the market should be completed at the first sign of a trend.
origin of the trend in the long term, usually due to fundamental factors.So, the trend can be formed under the influence of important news.One of the postulates of stock trading is: do not play against the trend or play in the direction of the trend.If a trader tries to play against the market, it eventually turns into a loss.
development trend may take some time.Trends can last for months or even years.Completion of the trend is also due to fundamental factors.A sign of its end can be a big price swings in the opposite direction of the trend.Such fluctuation suggests that the major player closed position.
If you look at the graph below, you can see a downward trend.The trend line is held in a downtrend on price highs.In a downtrend line it is carried on price lows.
To determine the trend traders also use additional indicators such as moving averages, ADX and others.
support and resistance levels
Resistance level is a line that touches the price several times and fought back.For example, the trend line (in the example above) is the line of resistance.The picture shows that the price touches the trendline, but it does not break.About trendline is necessary to enter the market in the direction of the trend in the absence of evidence of its completion.
Once the price breaks through the resistance line, the line becomes a level of support prices.This is illustrated in the chart below.
Geometric Shapes
are the following figures used for technical analysis chart: triangle, rectangle, "flag" ("pennant"), "head and shoulders", "triple top", "double and triple bottom", "saucer" and others.
All figures are divided into two groups: reversal and continuation patterns.Figures show a reversal trader to a reversal of the current trend and the figures continue - point to its most probable continuation.The most common method of geometric shapes is used not by itself, but together with other analysis tools.
Technical analysis of the stock market, as the Forex market involves the use of geometric shapes, due to the repetitive behavior of the majority of traders in the event of their occurrence on the chart.And the stock market and the foreign exchange market, this analysis technique is widespread.
Triangle. Distinguish four types of triangles are used to predict the behavior of prices: descending, ascending, symmetrical and expanding triangle.This figure refers to a group of turn.Before entering the market in the formation on the chart of this figure you must wait for the breakdown of its borders.
rectangle. This figure is formed when a precise chart of the horizontal support and resistance lines.The rectangle shows the balance of power in the market.
"flag" or "pennant." This trend continuation patterns.The emergence of the flag or pennant on the chart is accompanied by a correction of the trend movement.
"head and shoulders". This figure is of great importance in the formation on the daily chart.In smaller timeframes operates a small number of traders, and thus a reaction to the formation of the figure below.The figure refers to a group of topping.Also in technical analysis is often used figure of "inverted head and shoulders", which in this case is called a "double bottom".
"triple top". This figure refers to a group of topping and forms three peaks in the same price level.
"double and triple bottom". This model is the opposite figure "triple top".Price describes three minima in the same range.
"Saucer." trend reversal pattern.Most importantly in the long time frames - daily, weekly chart.The formation of this pattern may last for more than a month.
Trend technical indicators
Determining the trend plays a crucial role in the trade.The game against the market rarely ends with a profit.Technical analysis of the stock market is very similar to the analysis of the currency.
Moving Average. moving average or MA are the most important indicator of the trend.This indicator visually represents a line, which is based on average prices over the period.In the construction of this indicator are the most important closing price.
in the investment market, there is a saying: "The market opened amateurs and professionals is closed."She fully reflects the importance of closing prices.Professional traders open transactions on large amounts and have a strong impact on the price.It is for these reasons, the closing prices is attached the greatest importance.
most popular variety of MA is a simple and exponential weighted moving average.Simple Moving Average (SMA) is based on the arithmetic average of the selected time period.Weighted Moving Average (WMA) is constructed taking into account the factor of "weight", ie. E. The latest prices are taken into account more fully.Exponential Moving Average (EMA) is similar to WMA, but takes into account all the prices of the previous period.
Usually traders use two different MA period.This buy signal is considered to be the intersection of the fast MA slow MA from the bottom up.Sell signal is considered to be the intersection of the fast MA slow MA from top to bottom.
Indicators group
Oscillators Oscillators measure the volume of the market.This group of indicators identifies the overbought and oversold, which is most likely to turn.Most signals are clear indicators of this group provide at trending price movement within the channel.
most popular among traders oscillators are as follows: MACD, Stochastics Oscillator, RSI and others.These indicators are used in technical analysis, not only the stock, but the foreign exchange market.
indicator MACD. This indicator is constructed on the basis of moving averages of different periods and is intended to determine the price reversal.It stands as: «MovingAverageConvergence / Divergence», which translates as "convergence / divergence moving averages."
The formula for calculating this indicator is as follows: MACD = Fast EMA - Slow EMA.
The properties of this oscillator provides field "fast" and "slow", which correspond to the period of fast and slow EMA.
When the price is above zero and the indicator is growing, this suggests upward movement of the price, and vice versa, if the price is below zero and falls, it shows a downward motion.
signals of this indicator is the intersection at the cost of zero.Thus, the intersection of the zero mark from the bottom up - a signal to buy, and from the top down - a signal to sell.
If the indicator shows a false price movement (divergence), it serves as a signal to the turn of the price.
Indicator Stochastics Oscillator. Stochastics (Stochastic) takes into account not only the closing prices, but also local maxima and minima.This indicator is more informative than the other indicators of the group of oscillators.This indicator provides the overbought zone, which is located above the level of "80", and the oversold zone, which is located below the "20".
signaled the entrance to the market is the intersection of two lines similar to the signal indicator MACD.The divergence on this oscillator also serves as a strong signal to enter the market.
indicator RSI. main parameter of this indicator is a period for which it is built.The recommended value of the author - 14, but also often used periods of 9 and 12. This indicator is used to measure the strength of a trend.He compares the rate of growth and falling prices for the selected period of time.
If the line of the indicator is pointing up, it speaks about the predominance of a growing trend in the market, and vice versa.Conventionally, the balance of power, that is, market equilibrium is achieved at around 50. The intersection of line level indicator 50 from the top down is a signal for the opening short positions.Crossing the 50 level from the bottom up - a signal to buy.
In conclusion
Technical analysis of the stock market implies the presence of such indicators, which apply only on the market, these include: NH-L, TRIN, MAS and others.Often used to analyze the Forex indicators that have been listed in this article.Technical analysis of the stock market involves the simultaneous use of several indicators that are able to complement each other.But we should take into account other factors in predicting prices.
Forex market specific.Trading on the foreign exchange market are speculating in currency rates.Currency Forex is traded in pairs, such as EUR / USD, GBP / USD.At the same time Forex-indicators are used and the stock market.Stock market - an abstract concept, but it is closely linked with currency exchange.When a large purchase of shares used currency, which immediately reflected in its price.At the same time, the sharp depreciation of the currency may greatly affect the stocks of many companies.
