Stocks & Shares Education Centre

is a method of evaluating future security prices and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns.




A stock market term - The attempt to look for numerical trends in a random function. The stock market used to be filled with technical analysts deciding what to buy and sell, until it was decided that their success rate is no better than chance. Now technical stock analysis is virtually non-existent. The Readers Submitted Examples page has more on this topic.
Research and examination of the market and securities as it relates to their supply and demand in the marketplace. The technician uses charts and computer programs to identify and project price trends. The analysis includes studying price movements and trading volumes to determine patterns such as Head and Shoulder Formations and W Formations. Other indicators include support and resistance levels, and moving averages. In contrast to fundamental analysis, technical analysis does not consider a corporation's financial data.

Technical analysts study trading histories to identify price trends in particular stocks, mutual funds, commodities, or options in specific market sectors or in the overall financial markets. They use their findings to predict probable, often short-term, trading patterns in the investments that they study. The speed (and advocates would say the accuracy) with which the analysts do their work depends on the development of increasingly sophisticated computer programs.

Technical Analysis supposes markets have memory.If so, past prices, or the current price momentum, can give an idea of the future price evolution. Technical Analysis is a tool to detect if a trend (and thus the investor's behavior) will persist or break. It gives some results but can be deceptive as it relies mostly on graphic signals that are often intertwined, unclear or belated. It might become a source of representiveness heuristic (spotting patterns where there are none)




Technical analysis has become increasingly popular over the past several years, as more and more people believe that the historical performance of a stock is a strong indication of future performance. The use of past performance should come as no surprise. People using fundamental analysis have always looked at the past performance of companies by comparing fiscal data from previous quarters and years to determine future growth. The difference lies in the technical analyst's belief that securities move according to very predictable trends and patterns. These trends continue until something happens to change the trend, and until this change occurs, price levels are predictable.

There are many instances of investors successfully trading a security using only their knowledge of the security's chart, without even understanding what the company does. However, although technical analysis is a terrific tool, most agree it is much more effective when used in combination with fundamental analysis.

Fundamental Analysis

Fundamental analysis looks at a share’s market price in light of the company’s underlying business proposition and financial situation. It involves making both quantitative and qualitative judgements about a company. Fundamental analysis can be contrasted with 'technical analysis’, which seeks to make judgements about the performance of a share based solely on its historic price behavior and without reference to the underlying business, the sector it's in, or the economy as a whole. This is done by tracking and charting the companies stock price, volume of shares traded day to day, both on the company itself and also on its competitors. In this way investors hope to build up a picture of future price movements.

15.What is a Technical Analysis ?

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Traditionally, saving has been viewed as quite different from investing. In most savings alternatives, the initial amount of capital or cash remains constant, earning guaranteed rates of interest.



The capital value of investments can go up or down. Returns are not guaranteed. However, creation of money market funds and deregulation of the banking industry have resulted in a variety of savings options that earn variable rates of return.

Savings provide funds for emergencies and for making specific purchases in the relatively near future (generally within two years). The primary goal is to store funds and keep them safe. This is why savings are generally placed in interest-bearing accounts that are safe (such as those insured or guaranteed by the federal government) and liquid (those in the form of cash or easily changed into cash on short notice with minimal or no loss). However, these generally have low yields. Because of the opportunities for earning a higher return with a relatively small pool of funds, some financial experts suggest that savers consider slightly higher risk (but liquid) alternatives for at least part of their savings.

Saved money is insurance. It is insurance against risk, against losing your job, against having a major unexpected repair bill or medical expense in the family. It is the backbone of you and your family’s financial well-being. Saved money grants you financial security. And the more you save, the more financial secure and independent you will be.

The goal of investing is generally to increase net worth and work toward long-term goals. Investing involves risk. Risk of your stocks losing money, or even going bankrupt (Enron, MCI, the airlines, etc. etc.). Risk of interest rates rising, and bond prices falling. Risks of your broker swindled you, or coerced you though his sales pitch to buy speculative investments. Risks of the economy. Risks of a particular industry. Risk of losing your principal. Risk of losing it all, and then some (such as with margin calls).

16.Saving VS. Investing ?

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If you've ever owned stocks or held certain other types of investments, you might already be familiar with the concept of dividends.


Even those people who have made investments that paid dividends may still be a little confused as to exactly what dividends are, however… after all, just because a person has received a dividend payment doesn't mean that they fully appreciate where the payment is coming from and what its purpose is.
If you have ever found yourself wondering exactly what dividends are and why they're issued, then the information below might just be what you've been looking for.

Defining the Dividend

Dividends are payments made by companies to their stockholders in order to share a portion of the profits from a particular quarter or year. The amount that any particular stockholder receives is dependent upon how many shares of stock they own and how much the total amount being divided up among the stockholders amounts to. This means that after a particularly profitable quarter a company might set aside a lump sum to be divided up amongst all of their stockholders, though each individual share might be worth only a very small amount potentially fractions of a cent, depending upon the total number of shares issued and the total amount being divided. Individuals who own large amounts of stock receive much more from the dividends than those who own only a little, but the total per-share amount is usually the same.

When Dividends Are Paid

How often dividends are paid can vary from one company to the next, but in general they are paid whenever the company reports a profit. Since most companies are required to report their profits or losses quarterly, this means that most of them have the potential to pay dividends up to four times each year. Some companies pay dividends more often than this, however, and others may pay only once per year. The more time there is between dividend payments can indicate financial and profit problems within a company, but if the company simply chooses to pay all of their dividends at once it may also lead to higher per-share payments on those dividends.

Why Dividends Are Paid

Dividends are paid by companies as a method of sharing their profitable times with the stockholders that have faith in the company, as well as a way of luring other investors into purchasing stock in the company that is paying the dividends. The more a particular company pays in dividend payments, the more likely it is to sell additional common stock… after all, if the company is well-known for high dividend payments then more people will want to get in on the action. This can actually lead to increases in stock price and additional profit for the company which can result in even more dividend payments.


Getting the Most Out of Your Dividends

In order to get the most out of the dividends that you receive on your investments, it is generally recommended that you reinvest the dividends into the companies that pay them. While this may seem as though you're simply giving them their money back, you're receiving additional shares of the company's stock in exchange for the dividend. This will increase future dividend payments (since they're based upon how much stock that you own), and can set you up to make a lot more money than the actual dividend payment was for since increases in stock prices will affect the newly-purchased stock as well

17.What are Dividents ?

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What is NET ASSET VALUE ?
The Term Net Asset Value (NAV) is used by investment companies to measure net assets. It is calculated by subtracting liabilities from the value of a fund's securities and other items of value and dividing this by the number of outstanding shares. Net asset value is popularly used in newspaper mutual fund tables to designate the price per share for the fund.

The value of a collective investment fund based on the market price of securities held in its portfolio. Units in open ended funds are valued using this measure. Closed ended investment trusts have a net asset value but have a separate market value. NAV per share is calculated by dividing this figure by the number of ordinary shares. Investments trusts can trade at net asset value or their price can be at a premium or discount to NAV.

Value or purchase price of a share of stock in a mutual fund. NAV is calculated each day by taking the closing market value of all securities owned plus all other assets such as cash, subtracting all liabilities, then dividing the result (total net assets) by the total number of shares outstanding.

Calculating NAVs - Calculating mutual fund net asset values is easy. Simply take the current market value of the fund's net assets (securities held by the fund minus any liabilities) and divide by the number of shares outstanding. So if a fund had net assets of Rs.50 lakh and there are one lakh shares of the fund, then the price per share (or NAV) is Rs.50.00.

18.What is NET ASSET VALUE ?

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19.Common Trading Mistakes ?

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This is the last chapter of Stocks & Shares Education Centre .I feel this will really guide newbies to right path.

20.Do you have a Trading Plan ?

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