SUPPLY, DEMAND AND PRICE ACTION


“A technical analyst knows the price of everything, but the value of nothing”. Technicians are only concerned with two things:

* What is the current price of the stock.

* What is the history of the price movement of the stock.

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 direction approach. Why did the prices go up? It is simple ,more buyers than sellers, it means supply is less than demand.

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology, Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movement that often repeat themselves.

The beauty of technical analysis lies in its versatility. Because the principles of technical analysis are universally applicable, each of the analysis steps can be performed using the same theoretical background. You don’t need an economics degree to analyze a market index chart. You don’t need to be a genius to analyze a stock chart. Charts are charts . It does not matter if the time frame is 2 days or 2 years . It does not matter if it is a stock, market index or commodity. The technical principles of support, resistance, trend, trading range and other aspects can be applied to any chart. While this may sound easy, technical analysis is by no means easy. Success requires serious study, dedication and an open mind.

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