Technical analysis - the study of past price movements to predict its future movement. Price - the most important statistics in the world of technical analysis, as it is the only accurate measure of investor sentiment, the convergence of supply and demand.
Technical analysis suggests that the mood of investors is no less and perhaps more important determinant price than fundamental factors such as profits, dividends and miscellaneous.
From this perspective, many contradict fundamental and technical analysis, but it is very far from the truth. Technical analysis - the study of price and the factors that determine it. It would be foolish to assume that fundamental analysis does not play a role in shaping the preferences of investors. The technical analyst believes that all preferences are hidden only in the statistics of the price.
There are three important principles that govern all the technical analysis. The first - the price is not coincidental, the second - the price prefigures fundamental changes and the third - the ratio between price and time line.
Now that we have a scheme marshuta, let us begin the journey to an understanding of some basic concepts of technical analysis.
Price - is not coincidental
Opponents of technical analysis believe the price of the end result of all that is known about the asset at any point and time, as this knowledge is constantly evolving, it is impossible to predict the price with any degree of success. They convince us that the price - coincidental.
The first is an objective look at the schedule of prices is difficult to agree with this opinion. Price is not accidental, it consists of periods of consolidation, when the demand and supply of shares is in relative equilibrium, and periods of rapid price movements (trends), which is the imbalance between supply and demand.
Consider the case with the Visx Inc. (VISX) in early 1999.
In early 1999, Visx (EYE) has become a very hot action. Manufacturer of laser systems used for rapid corrective eye surgery, believed to have unlimited potential. Since mid-January to the end of February 1999 in the action was a period of consolidation under the $ 35 to $ 40 for a breakthrough in early March at the five-day volume. The action moved to trend phase, which lasted until early April. During this stage the event has grown by more than 75 percent, as investors realized that the laser eye surgery has become multi-industry. The next phase of consolidation began with record high share price in April and lasted until early June. During this period, action has remained in a relatively dense band of prices and volume significantly decreased. In the absence of new fundamental news, and supply and demand are in relative equilibrium. In early June, the company Visx announced record profit and revenue growth and share again rose to a new peak, this time Piercing $ 70 at almost ten average. A new trend has led to the growth stage of the share price remains at fifty percent, to $ 105, less than two months.
During each of these four stages of the course Visx shares moved to a characteristic, if not predictable models.
The price of your stock is falling fast and you do not know why? Technical analysts believe that the price prejudged important fundamental change, and we have an example which proves the truth of this thesis.
Price prefigures fundamental changes
Most often, the fundamental change does not happen overnight, they take time. Because the price - in fact the result of all that is known to the public and hidden fields, it is reasonable to expect that some buyers and sellers with information, so-called "smart money". Although not always accurately, but "smart money" look for clear information on the possible movement of the market, which has not yet public. In most cases, this information - the result of an expensive, independent fundamental research. This encourages the purchase and or sale, which anticipates the fundamental changes and a price trend.
It seems that "smart money" had an unfair advantage over the market in general and to a large extent this is true. Information - good, like all others. We must remember that, when action seems to have increasing or decreasing in the apparent absence of available information.
Consider the case of one of the favorite market - Sun Microsystems (SUNW) in the last quarter of 2000.
In the first half of 2000, Sun microsystems (SUNW) and other champions of "peace wires were among the hottest stocks surge. Despite rising incomes and very good assessment of Wall Street analysts, by September, the course apparently began to slow. After reaching the $ 65 share beginning to move downward, falling to $ 48 in mid-October. Even before the reports of third quarter earnings a few Wall Street firms have given advice on the purchase. The action had grown up slowly back up to $ 61 by the end of October. When the message came out of earnings for the third quarter, news could not be better. The company reported record profits and income and looking to the future with a clear optimism, but after a short recovery action has plummeted to $ 38 by the end of November. Three weeks later, managers of Sun microsystems (SUNW) in the process recognized that the prospect was much worse.
In the case of Sun microsystems stocks accurately predicted the peak of the fundamental outlook is much earlier than that, as management issued bad news.
Sun microsystems price schedule may be the key to the relation between time and price, it is clear. The relationship between price and time line, it is dedicated to our next section.
The relationship between price and time line
One of the most difficult concepts to understand - the linearity of the relationship between price and time. That is, the price is not in a position long behave as expected, the more likely we will have to enlarge our perception of the true price.
The simplest example of this phenomenon relates to our ability to take losses. Most investors do not like loss. When they buy "wrong" action, they will often try to get out of that position without a loss, but add up to a week of days, weeks - in the months ahead, our perseverance is opposed to common sense. The process of liberation from irrationality begins and slowly comes to understand that it is necessary to change the acceptable level of output (obviously, we will not "sit" on a bad stock forever). This - the linear relationship between time and price - the more time passes, the more elastic will be the mathematical expectation of the price.
Consider the example of the manufacturer of sports clothing and shoes Timberland (TBL).
Long time it seemed that the Timberland (TBL) is doing everything correctly. Clothes and shoes were in vogue for the new generation, sales and profits grew in the dizzy pace. In anticipation of a record share of income rose to a new up to $ 72 in mid-January. After a sharp fall-back to $ 65 in just a few sessions, investors were comforted excellent presentation on the income and very good news from the managers. Distribute brand in Europe, it was thought went well and the future looked very colorful, but, despite this background, the action has not been able to show is nothing better than to rise to $ 68 after irningov. Worse, the action is closed for a minimum of the day and with the opening of the next day jumped down to a point. Those who bought the stock because of the good news, caught the highest price at a very high volume. This led to repent of customers (they felt the trap and is now actively trying to sell for the same price). However, after lifting up to $ 66, with a strong sellers market to immediately began dempingovat, and already two weeks later, share traded at $ 52. Just hope to leave with no loss, traders began to sell at every significant rise. That was in early March, mid April, at the end of May. In each case, they were ready to take over all of its shares lower. Such a "sliding scale" led campaign rolled down to $ 37.50 by mid-July.
Although the example used by Timberland descending trend of prices, we must remember that the same principle applies to the growing stock. If the price is far away from us a pre-entry level, perhaps we should reconsider why we need it "to pursue."
Conclusion
# The technical analyst believes that the expectations of the future are hidden in the statistics of the price.
# Despite the claims of opponents of technical analysis, price is not accidental, it is defined by periods of consolidation, intermittent periods of trends.
# It is reasonable to expect that at least some buyers and sellers informed. These investors anticipate trends and in this sense, the price tends to precede a fundamental change.
# In the human nature to try to reduce losses when the share acquired by "wrong". Investors will try to get out of positions without a loss, but this desire decreases linearly with time.
Technical analysis suggests that the mood of investors is no less and perhaps more important determinant price than fundamental factors such as profits, dividends and miscellaneous.
From this perspective, many contradict fundamental and technical analysis, but it is very far from the truth. Technical analysis - the study of price and the factors that determine it. It would be foolish to assume that fundamental analysis does not play a role in shaping the preferences of investors. The technical analyst believes that all preferences are hidden only in the statistics of the price.
There are three important principles that govern all the technical analysis. The first - the price is not coincidental, the second - the price prefigures fundamental changes and the third - the ratio between price and time line.
Now that we have a scheme marshuta, let us begin the journey to an understanding of some basic concepts of technical analysis.
Price - is not coincidental
Opponents of technical analysis believe the price of the end result of all that is known about the asset at any point and time, as this knowledge is constantly evolving, it is impossible to predict the price with any degree of success. They convince us that the price - coincidental.
The first is an objective look at the schedule of prices is difficult to agree with this opinion. Price is not accidental, it consists of periods of consolidation, when the demand and supply of shares is in relative equilibrium, and periods of rapid price movements (trends), which is the imbalance between supply and demand.
Consider the case with the Visx Inc. (VISX) in early 1999.
In early 1999, Visx (EYE) has become a very hot action. Manufacturer of laser systems used for rapid corrective eye surgery, believed to have unlimited potential. Since mid-January to the end of February 1999 in the action was a period of consolidation under the $ 35 to $ 40 for a breakthrough in early March at the five-day volume. The action moved to trend phase, which lasted until early April. During this stage the event has grown by more than 75 percent, as investors realized that the laser eye surgery has become multi-industry. The next phase of consolidation began with record high share price in April and lasted until early June. During this period, action has remained in a relatively dense band of prices and volume significantly decreased. In the absence of new fundamental news, and supply and demand are in relative equilibrium. In early June, the company Visx announced record profit and revenue growth and share again rose to a new peak, this time Piercing $ 70 at almost ten average. A new trend has led to the growth stage of the share price remains at fifty percent, to $ 105, less than two months.During each of these four stages of the course Visx shares moved to a characteristic, if not predictable models.
The price of your stock is falling fast and you do not know why? Technical analysts believe that the price prejudged important fundamental change, and we have an example which proves the truth of this thesis.
Price prefigures fundamental changes
Most often, the fundamental change does not happen overnight, they take time. Because the price - in fact the result of all that is known to the public and hidden fields, it is reasonable to expect that some buyers and sellers with information, so-called "smart money". Although not always accurately, but "smart money" look for clear information on the possible movement of the market, which has not yet public. In most cases, this information - the result of an expensive, independent fundamental research. This encourages the purchase and or sale, which anticipates the fundamental changes and a price trend.
It seems that "smart money" had an unfair advantage over the market in general and to a large extent this is true. Information - good, like all others. We must remember that, when action seems to have increasing or decreasing in the apparent absence of available information.
Consider the case of one of the favorite market - Sun Microsystems (SUNW) in the last quarter of 2000.
In the first half of 2000, Sun microsystems (SUNW) and other champions of "peace wires were among the hottest stocks surge. Despite rising incomes and very good assessment of Wall Street analysts, by September, the course apparently began to slow. After reaching the $ 65 share beginning to move downward, falling to $ 48 in mid-October. Even before the reports of third quarter earnings a few Wall Street firms have given advice on the purchase. The action had grown up slowly back up to $ 61 by the end of October. When the message came out of earnings for the third quarter, news could not be better. The company reported record profits and income and looking to the future with a clear optimism, but after a short recovery action has plummeted to $ 38 by the end of November. Three weeks later, managers of Sun microsystems (SUNW) in the process recognized that the prospect was much worse.In the case of Sun microsystems stocks accurately predicted the peak of the fundamental outlook is much earlier than that, as management issued bad news.
Sun microsystems price schedule may be the key to the relation between time and price, it is clear. The relationship between price and time line, it is dedicated to our next section.
The relationship between price and time line
One of the most difficult concepts to understand - the linearity of the relationship between price and time. That is, the price is not in a position long behave as expected, the more likely we will have to enlarge our perception of the true price.
The simplest example of this phenomenon relates to our ability to take losses. Most investors do not like loss. When they buy "wrong" action, they will often try to get out of that position without a loss, but add up to a week of days, weeks - in the months ahead, our perseverance is opposed to common sense. The process of liberation from irrationality begins and slowly comes to understand that it is necessary to change the acceptable level of output (obviously, we will not "sit" on a bad stock forever). This - the linear relationship between time and price - the more time passes, the more elastic will be the mathematical expectation of the price.
Consider the example of the manufacturer of sports clothing and shoes Timberland (TBL).
Long time it seemed that the Timberland (TBL) is doing everything correctly. Clothes and shoes were in vogue for the new generation, sales and profits grew in the dizzy pace. In anticipation of a record share of income rose to a new up to $ 72 in mid-January. After a sharp fall-back to $ 65 in just a few sessions, investors were comforted excellent presentation on the income and very good news from the managers. Distribute brand in Europe, it was thought went well and the future looked very colorful, but, despite this background, the action has not been able to show is nothing better than to rise to $ 68 after irningov. Worse, the action is closed for a minimum of the day and with the opening of the next day jumped down to a point. Those who bought the stock because of the good news, caught the highest price at a very high volume. This led to repent of customers (they felt the trap and is now actively trying to sell for the same price). However, after lifting up to $ 66, with a strong sellers market to immediately began dempingovat, and already two weeks later, share traded at $ 52. Just hope to leave with no loss, traders began to sell at every significant rise. That was in early March, mid April, at the end of May. In each case, they were ready to take over all of its shares lower. Such a "sliding scale" led campaign rolled down to $ 37.50 by mid-July.Although the example used by Timberland descending trend of prices, we must remember that the same principle applies to the growing stock. If the price is far away from us a pre-entry level, perhaps we should reconsider why we need it "to pursue."
Conclusion
# The technical analyst believes that the expectations of the future are hidden in the statistics of the price.
# Despite the claims of opponents of technical analysis, price is not accidental, it is defined by periods of consolidation, intermittent periods of trends.
# It is reasonable to expect that at least some buyers and sellers informed. These investors anticipate trends and in this sense, the price tends to precede a fundamental change.
# In the human nature to try to reduce losses when the share acquired by "wrong". Investors will try to get out of positions without a loss, but this desire decreases linearly with time.
BareSearch.com. Translated Investo.ru
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