Methods And Assumptions Used for Stock Market Technical Analysis

The technical analysis along with the fundamental analysis has proved beneficial to the people in the past to generate best stock cash tips. Here are some of the important methodsand assumptions used in technical analysis.

Methods Used in Technical Analysis

  • Trend Method
  • Indicators Method
  • Pattern Methods

Trend Method: In trend method the general trend or the price movements are identified. It is always advisable to trade with the trend and not against the trend. The trend line method is a detailed method of deciding trend of the price movements. It is an effective way of trading.

Indicators Methods: In this method various indicators are calculated and are plotted on the charts. Indicators like moving averages and RSI are assumed to provide adequate information about the price movements and price reversals. These also have been considered by many as the best way to anticipate the price movements

Pattern Methods: It depends on the hypothesis that history repeats itself in the case of price movements and thus specific patterns have been found to repeat it again and again. Thus, some common patterns are extensively studied in the technical analysis domain.

Trading in the stock market or the commodity market is an art. For a person who wants to gain good profits from the stock market either he should first try to study the stock market or the commodity market wherein he wants to invest or try Stock Cash Tips provided by technical experts. For a technical trader the charts are the most important entity. A trader must closely look at the daily charts, weekly charts as well as monthly charts. Also, he must look at the various patterns which are forming regularly in the charts. The various patterns are tentative to repeat it as the emotions in the market repeat itself on similar situations.

Three Important Assumptions of Technical Analysis

The three important assumptions of technical analysis include that

  1. Firstly the market accounts for everything in it. That is the prices in the stock markets are self contained and include all information. That is, there is no need to look at the economic factors or the condition of the company. The price data contain all this information.
  2. Second assumption states that the prices tend to move with the trend. That is the prices will move either in an uptrend or in a down trend. Thus a trader must take the advantage of the present trend and should always trade with the present trend. It is not advisable to trade against the trend.
  3. The third assumption states that the history repeats itself, especially in the case of market prices. Thus, regular patterns are identified in the market and are expected to repeat itself.

Thus, it takes a lot of time to master the trading strategies or the art of trading. Also for the newbie or the person having not much experience in trading in the stock market, one must first form the strategy and then do the paper trading without really investing in the market right from the beginning. The newbie trader can also trade based on the stock cash tips from expert advisory firms like ProfitAim Research.

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