Technical Analysis

This information is just a brief idea about Technical Analysis. Check out the links in Extras for more information.

Technical Analysis

Technical analysis is identifying trading opportunities by analyzing the trends in trading activity such as volume or price movement. Technical analysis is used in any securities using historical data such as stocks, futures, commodities, forex, and more.

Chart

The price chart is the first tool that all technical analysts learn. There are many types of chart. 2 of them:

Line Chart:

Best at showing trends but does not show what happens in the trading period.

Candlestick Chart:

Shows the Open, High, Low, Close (OHLC) price for the day. Also shows the volatility.It is easier to read also.

Commonly Used Indicators:

Trendlines:

Trendlines are drawn when the price is going up or down or sideways. It is also used to find areas of support and resistance. Support and Resistance are the levels at which the price does not break past. Support is at the bottom of price movements while resistance is at the top.

Moving Averages:

Moving Average calculates the average of the price movement and in doing so it also eliminates "noise" which are short fluctuations. There are also different moving averages such as simple MA which focuses on all data equally whereas exponential MA weighs more importance on newer data.

Relative Strength Index (RSI):

RSI tells us whether a stock is oversold or overbought. For example, when the rsi is above 80, it tells us it is overbought and when it is below 20, it is oversold.

Moving Average Convergence Divergence (MACD)

MACD calculates the difference between 2 EMAs and it acts as a trigger for buy and sell.

Strategies

There are many strategies that can be found online. Some of the famous ones are Swing Trading, Breakout Trading, Momentum Trading and Scalp Trading.(Scalp trading is not possible in NEPSE). Every method involves more than two indicators used together so it is best to find a strategy that works for you best.