In principle the technical analysis is a method of analysis of investment instrument that uses historical data about changes in stock prices or other instrument, volume and some other market indicators to give birth to the recommendation of investment decisions. This analysis can be applied to the stock exchange, foreign exchange market, the stock market or whatever commodity price movements kept on the influence
by supply and demand.
The difference of the technical and fundamental analysis.
If the fundamental analysis more use of corporate indicators to analyze a company's stock price, instead of stock technical analysis as well as other instruments more use of market data. Regarding the common market data presented in the form of graphs (charts), the technical analyst is more often cultivate that sort of graphics rather than financial reporting issuers. That's why adherents of this flow is often dubbed as a chartist.
Using data-data about the price, supply and demand in the past, technical analysis stock aims predict how demand and supply in the future, as well as analyze stock prices that might be formed by them. The goal is to identify a trend or a recurring pattern of movements in the share price and then exploited for profit. Technical analysts also believe that the process of change in stock price caused by the presence of a new information in the market will tend to follow a specific trend. By concluding these matters, technical analysis is used to underpin the decision when to take profit (profit taking), reduce losses (cut loss), start doing the accumulation of stock or began to hold positions (wait & see).
Fundamental analysis and technical analysis, which is better? Error rate technical analysis is relatively higher than fundamental analysis. But, if we are disciplined and use the right tool, technical analysis of stock could be equally strong fundamental analysis of stocks. In principle is the buy low sell high, buy cheap sell expensive.
Analysis of the stock price and trading volume is the primary means of technical analysis of stocks and the graph is a means for displaying the data. The trade volume of data will be used to provide a general overview about the condition of the market and will help to estimate the price trend next. Changes in stock prices either increase or decrease will usually correlates with the increase or decrease in the volume of trade. The drop in the price of one particular pattern that is followed by a very high sales volume, will generally be translated that markets (stocks) will experience a bearish (price decreases).
Technical analysis stock more use of market data. Therefore, technical analysts would rather pay attention to stock price movements on the stock than observing the financial report or read a news paper with regard to issuers that are being observed. Their task is indeed observe that stock price changes to study patterns of thought or behavior of the other parties involved in the Exchange. From the analysis of stock prices that they predict the direction the stock price movement through the data presented in the form of (charts).
Identify a trend or pattern of the price movement of a stock that is the main goal of repeating on a technical analyst, of course with the hope to be able to find the signal to buy (buy), hold (hold) or sell (sell). In conducting technical analysis of stocks there are only a few main data required, namely a change of the price of the stock (or other instrument) and the value of the transaction. Technical analysts (chartist) sorting out the price into four types: opening price, highest price, the lowest price and the closing price.
We all understand, that stock prices can rise and fall quickly or gradually so that on a graph would look to form some of the peaks, valleys or flat (prices move in a narrow range). In an effort to analyze stock prices and identify a trend change in the stock price, the chartist based on two critical assumptions. First, the price moves in a particular trend and secondly, this trend will continue until there is an event that makes the trend will change.
To give you an idea of how it works technical analysts, here are some methods of technical analysis of stock the most commonly used and easily understood.
- The Moving Average(MA)
The moving average (MA) or moving average is one of the many stock price analysis method that is often used in technical analysis of stocks. The moving average (MA) is the average stock price over a period of time that has past and then plotted into a graph along with the actual stock price in the market at that time. MA which is derived from the average share price during five trading days, for example, is written as MA-5. Ma comes from the average price for 15 days written as MA-15. So moving average stated average the price of shares will be counted again as time goes by. Price data that is used is usually the closing price (closing price).
Make a graph wheelbase X (horizontal) and Y (vertical). The X symbolized the day (date) and Y axis symbolic price. Then calculate the average share price over the past 10 days ago, including today (MA-10). Connect points from the average price in the line of MA. At the same time, also connect the dots the closing price of the shares (the actual price) each day at the same graph until your desired time period. Long will form two curves i.e. curve MA and the actual curve.
If the curve is a way of analysing the actual penetrating MA curve from bottom to top with a high enough volume of trade, it would signal a good time to buy stocks. Conversely, if the actual curve penetrate curve MA with a trading volume of tingg from top to bottom, it gives a signal to sell. Stock price movements in the form of a price increase followed by a high volume of trade is interpreted as a signal the market will improve (bullish). While the price change in the form of price reductions that followed the high trading volume is interpreted as a signal the market will deteriorate (bearish).
- Double Top and Double Bottom
The Stock Price Double Top GraphicHarga Stock Bottom Double Graphic
Stock technical analysis method is the next method of the double top and double bottom. Double Top, this pattern is formed when there is a change in the price of shares in the form of rising up on a certain level, then down and then up again (with a smaller volume of trade) equals the highest previous price level and then decreases again. If the incident recurs again, then will form a curve that has two twin peaks (such as the letter M). The pattern of this stock price analysis showed that the market has twice unsuccessfully tried to penetrate the upper price limit (highest). If the price was later dropped to the lowest price level break through earlier (before the second Summit), it indicates the trend of the price movement of stocks will continue to decline. Double top pattern it gives a signal to immediately perform the action of selling.
The reverse of the pattern of Double Top pattern i.e. a double bottom (like the letter W). By the same logic, this pattern provides a signal to perform action buy because it is estimated the price will continue to rise.
- Triangle
Stock technical analysis method of triangle (triangle curve pattern) is divided into two, namely the Ascending Triangle (ascending triangle) and Descending Triangle (descending triangles). Descending Triangle is formed if there is some of the same low valleys with some peaks are declining. In other words, there was a change in stock price between the boundary lines of the lower horizontal with the boundary lines of sloped downhill. If prices break through the lower boundary line is accompanied by an increase in trading volume, it gives a signal to perform action selling because the stock price analysis predicted prices will continue to decline.
Stock Price Ascending Triangle Stock Prices Graphic Descending Triangle Graphic
While Ascending Triangle is formed if the stock price movement followed a pattern that contrasts with a Descending Triangle. This pattern gives a signal to perform action buy stocks because the estimated price will continue to come up.
- Head & Shoulder
Technical analysis stock Head & Shoulder signal to sell because the estimated prices will continue to decline. The line of the neck (neckline) is described by drawing a straight line from the bottom of both shoulders to get a signal when the selling action performed. If from the analysis of the stock price, the stock price movement (right shoulder) broke through the line of the neck from top to bottom (piercing the neckline), this is the signal to immediately sell the stock to reduce losses (cut loss).
Stock Prices Head & Shoulder Graphic
Head & shoulder can occur in reverse (Inverse Head & Shoulder), two shoulders and the head leading down. The line of the neck is formed by drawing a straight line above both shoulders. If that pattern is formed and the second on the shoulders of price curve (right shoulder) broke through the line of the neck from the bottom up, then it is a signal to buy because the stock price changes there is a trend where prices would continue to rise.
The shape and size of the Head or Shoulder & Inverse Head & Shoulder this can vary, this curve can in short periods of time and length, can be found or has a particular slope.
- Support Level & Resistance Level
Stock technical analysis on the support level and this resistance level, the price is said to be on the support level (SL) if these prices are at the lowest level and at the level of the stock price movement in the form of a decrease in the very difficult case. General SL was formed after a stock experienced a large price increase and then decrease due to the action of take profit (profit taking) from investors. Meanwhile, the share price is said to be at a resistance level (RL) if the price is at the highest level and on the level of prices is very difficult to ride. An RL tend to be formed after a stock has decreased significant gains from the previous price. The SL and RL can be diterjadi when rates are rising in the trends (uptrend), horizontal (sideway) or down (downtrend).
The Share Price Support Level & Resistance Level
To get the advantage you can use the principle of buy cheap, sell expensive (buy low sell high). So, with the proper stock price analysis, you have to buy the stock at a time when prices are on SL and sell the stock at current prices is estimated to be at RL. Of course the advantage obtained does not last long. The more people know of the SL and RL on a stock and use it, this pattern would break by itself. Key in using this method of technical analysis of stocks is the speed of obtaining information. People are the first to know of the existence of the SL and RL which had considerable potential to reap the benefits, while the latter just goto the rest only, or even the actual loss due to RL and SL-its been changed again.
Experts believe that if SL is penetrated, then usually the SL will be the new RL. Similarly, if RL who penetrated then the RL SL. The greater the volume of trade would further strengthen the position of the SL and RL happened.
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