I've been a strong believer in the power of charts as a forecasting tool.
To begin from the basic I'll start with the definition.
Technical Analysis is study of prices,in graphical form, to determine the trend.
Price: As a technical analyst that's all we need.( I'll explain later in another post why it so important)
Trend:- The old treacherous friend! It's the general direction of prices. As an example check this chart(
https://ibb.co/dWa0qa).
It's the Coal India's Feb chart.
The downward sloping line represents downtrend and the channel represents the breakout and beginning of an minor uptrend(in case you don't know what it is without being shown then my friend the next posts are for you).
The concept of prices and trends form the basis of Technical Analysis.
Why Technical Analysis?
Most people whom I've met often find it difficult to believe that charts could be used as the main tool of trade decision. They wait for some kind of rumours ,news,tips, expert analysis,astrology and what nots.
But I find it difficult to trust this sources. I've followed enough experts,chased enough tips to know that they at the end of the day apply the same basic principles to trading. The best of them refine their methods over the time. A luxury that retail investors like you and me can't afford to give. We end up being classified under the heading of 'dumb money'.
But I know for sure that if we could find trade invoices of these 'experts' then we'll find dozens of 'dumb calls'. As an example
A broker in June 2015 was bidding everyone to buy Bharti Airtel because of the Nokia-Ericson-Airtel tie-ups. A friend decided to buy @ 430 when he saw on TV. After a month it went down to 350. The broker advised my friend to hold and average his holdings each month. He went on adding it till his average came down to 300(it took an year and half with 6 lacs rupees). Then when he saw a blip at 380 last month and sold it for a profit. He believes he earned 25% in less than 2 years. He believes in his broker has a magical power. But he could have earned more in this two years had he invested in BPCL, Indusind bank,yes bank or any other such scrips.
Now they're after pharma. But I know where this is heading.
Blind luck! I'd say.
But what's done is done.
In later posts I'd explain less painful and costly( yes, there are cost involved with technical analysis) ways to survive the market.
