Technical Analysis

Background:

Let us try understanding it with the help of a short story.
Imagine you are on a vacation in a remote nation where everything including the dialect, culture, atmosphere, and sustenance is unfamiliar to you. On day 1, you do the customary touristy exercises, and by night you are exceptionally ravenous. You need to end your day by having an incredible supper. You make a few inquiries for a decent eatery and you are told about a pleasant nourishment road which is close by. You choose to try it out.

Incredibly, there are numerous merchants offering diverse assortments of nourishment. Everything appears to be unique and intriguing. You are completely confused in the matter of what to have for supper. To add to your predicament you can't make a few inquiries as you don't have the foggiest idea about the nearby dialect. So given this, in what manner will you settle on a choice on what to eat?

Indeed, you have two choices to make sense of what to eat.

Choice 1:
You visit a merchant, make sense of what they are cooking/offering. Keep an eye on the fixings utilized, cooking style, presumably taste a bit and make sense of in the event that you really like the nourishment. You rehash this activity over a couple of merchants, after which you would undoubtedly wind up eating at a place that fulfills you the most.

The preferred standpoint with this method is that you know precisely what you are eating since you have looked into about it all alone. However on the other side, the strategy you embraced isn't generally versatile as there could be around 100 odd merchants, and with restricted time available to you, you can most likely cover around 4 or 5 sellers. Subsequently there is a high likelihood that you could have missed the best tasting sustenance in the city!

Choice 2:
You simply remain in a corner and watch every one of the sellers. You attempt and discover a seller who is drawing in the greatest group. When you find such a merchant you make a basic presumption - 'The seller is pulling in such huge numbers of clients which implies he should make the best sustenance!' Based on your supposition and the group's inclination you choose to go to that specific merchant for your supper. Odds are that you could be eating the best tasting sustenance accessible in the city.

The benefit of this technique is the adaptability. You simply need to recognize the merchant with the greatest number of clients and wager on the way that the sustenance is great in light of the group's inclination. In any case, on the flipside the group require not generally be correct.

In the event that you could perceive, Choice 1 is fundamentally the same as Fundamental Analysis where you look into around a couple of organizations altogether.

Choice 2 is fundamentally the same as Technical Analysis where one sweeps for circumstances in view of the present pattern otherwise known as the inclination of the market.

Introduction to technical analysis:

Technical Analysis is a technique for assessing securities that includes a statistical examination of market action, for example, cost and volume. These examiners don't endeavor to measure a security's inborn value or intrinsic value, yet rather, utilize charts and different tools to recognize designs that can be utilized as a reason for Investment choices.

There are a wide range of types of Technical Analysis: Some depend on graph designs, others utilize specialized markers and oscillators, and most utilize a blend of strategies. Regardless, Technical examiners' restrictive utilization of verifiable cost and volume information is the thing that isolates them from their crucial partners. Not at all like major investigators,Technical investors don't fret about a stock's valuation – the main thing that issues are past exchanging information and what data the information may give about future value developments.

If fundamental analysis was the single most reliable indicator of trends, prices would predominantly fluctuate only 4 - 5 times a year - around quarterly results and special announcements like mergers and acquisitions etc!! Why would prices fluctuate almost daily? If the prices fluctuate ever so often, is there a way to forecast them? Yes according to technical analysis!!

The Technical Analysis is done using five key assumptions :

1 ) High Liquidity
2 ) History tends to repeat itself
3 ) There was no Extreme news
4 ) Market Discount Everything
5 ) The ‘WHAT’ is more important than ‘WHY’

High Liquidity

Liquidity is essentially volume. Heavily-traded stocks allow investors to trade quickly and easily, without dramatically changing the price of the stock. Thinly-traded stocks are more difficult to trade, because there aren't many buyers or sellers at any given time, so buyers and sellers may have to change their desired price considerably in order to make a trade. In addition, low liquidity stocks are often very low priced (sometimes less than a penny per share), which means that their prices can be more easily manipulated by individual investors. These outside forces acting on thinly-traded stocks make them unsuitable for technical analysis.

History tends to repeat itself

Technical analysts believe that history tends to repeat itself. The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable based on emotions like fear or excitement. Technical analysis uses chart patterns to analyze these emotions and subsequent market movements to understand trends. While many form of technical analysis have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.
Example: Every year January has witness a bloodbath in cryptocurrency market.

There was no Extreme news

Technical examination can't foresee extreme events, including business events, for example, an organization's CEO biting the dust startlingly, and political occasions, for example, a terrorist act. At the point when the powers of "extreme news" are affecting the value, specialists need to hold up quietly until the point when the graph settles down and begins to mirror the "new typical" that outcomes from such news.
Example: Coinmarketcap.com excluding Korean exchanges on their prices causing a panic selling recently.

Market Discount Everything

All known and unknown information in the public domain is reflected in the latest stock price. For example there could be an insider in the company buying the company’s stock in large quantity in anticipation of a good quarterly earnings announcement. While he does this secretively, the price reacts to his actions thus revealing to the technical analyst that this could be a good buy.

The ‘What’ is more important than ‘WHY’

Technicians, as technical analysts are called, are only concerned with two things:
1 ) What is the current price?
2 ) What is the history of the price movement?
The price is the end result of the battle between the forces of supply and demand for the company's stock. The objective of analysis is to forecast the direction of the future price. By focusing on price and only price, technical analysis represents a direct approach. Fundamentalists are concerned with why the price is what it is. For technicians, the why portion of the equation is too broad and many times the fundamental reasons given are highly suspect. Technicians believe it is best to concentrate on what and never mind why. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any asset is only what someone is willing to pay for it. Who needs to know why?

I will post the chart types and pattern's in the next one. Hope you guys like it.
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