Technical Analysis is statistical analysis of the stock activity like price and volume. It does not intend to find the fair value of a stock, rather technical analysis is the study of collective behaviour of people who are buying or selling the shares through Candle Stick, Trend, Charts, Pattern, Indicators and Oscillators. Technical Analysis involves more of statistical and visual analysis rather than value analysis which is done through fundamental Analysis.
Equity owners in share market have the authority to sell their shares without any consent of other shareholders. Hence even if you don’t participate in buying or selling, the value of your share will change as per the last traded price of the share. Hence it is very important to study the statistics behind buying and selling of shares. Technical Analysis has been derived from Dow Theory which is a compilation of editorials from Wall Street Journal. Charles H Dow, himself never coined Dow Theory. It was compilation and interpretation of his work by his followers. Charles Dow created Dow Jones Industrial Index and Dow Jones Rail Index for The Wall Street Journal.
Following are the main area’s of study in Current Technical Analysis
- Japanese Candle Sticks
- Trend Analysis – Part of Dow Theory
- Support & Resistance – Part of Dow Theory
- Volume Analysis
- Indicators & Oscillators