Technical Analysis terms usered generally

Technical Analysis: A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts to identify patterns that can suggest future activity. Technical analysts believe that the historical performance of stocks and markets are indications of future performance.

Trend: The general direction of the price of an asset or market. Trends can be thought of in varying lengths including short, intermediate and long term. If one can identify a trend, it can be highly profitable as you will be able to trade with the trend. It is best as a general strategy to trade with trends, meaning if the general trend of the market is headed up be very cautious towards taking any positions that rely on the trend going in the opposite direction.

. Trend has three directions:
1. Uptrend: When each successive peak and trough is higher than the previous one, prices are assumed to be in an uptrend. It is so named because the direction of prices is upward. Buying strength is the trading strategy to follow in such kind of a market.

2. Downtrend: When each successive peak and trough is lower than the previous one, prices are assumed to be in a downtrend. It is so named because the direction of prices is downward. Selling weakness is the trading strategy to follow in such kind of a market.

3. Sideways market: When prices are stuck in a range-they are neither going up or down in any significant manner-the market is said to be in a sideways trend or rather it is trendless. Buying weakness and selling strength should be the trading strategy to follow in a sideways range-bound market.

. Trend has three classifications:
1. Minor or Short-term Trend: The trend that lasts from five days to about three weeks are known as the short term or minor trend.

2. Intermediate or Medium term Trend: The trend that lasts for more than three weeks to six months may be called an intermediate trend. Medium term trend is somewhat synonymous to intermediate trend but is generally used to describe price trends that last between two months to six months.

3. Long term Trend: Any trend that continues for more than six months to several years is categorized as a long term trend.

. .
Accumulation: It is a phase in price activity where the range in which prices move around is relatively small and volume is comparatively small, and the final breakout is on the upside. This accumulation phase is generally found after a sustained downtrend and is normally found around the bottom.

Distribution: It is a phase in price activity where the range in which prices move around is relatively small and volume is comparatively small than the preceding phase when prices were rising, and the final breakout from the range happens on the downside. This phase is generally found after a sustained uptrend and is normally found around the top.

Consolidation: After a sustained swing in prices, market tends to take a breather and prices tend to oscillate within a range before resuming the original trend. This intervening phase is known as consolidation.

Support: The level of prices where demand for the asset or security overpowers supply. It is the level from which prices tend to bounce back upward or arrest its downward movement.

Resistance: The level of prices where supply for the asset or security overpowers demand. It is the level from which prices tend to reverse course and move down again or halt.

Volume: Number of security or assets-in equity markets shares, in futures markets contracts-traded within a given period of time. In market statistics published in newspapers, it is generally the number of securities or contracts traded during the day in question.

Open: This relates to the price of the first trade done for any security during the day or any given time period.

High: This relates to the highest price reached during the day or the time period in question.

Low: This relates to the lowest price reached during the day or the time period in question.

Close: This normally refers to the last traded price for the security during the trading day or any given time period. However, some exchanges like the National Stock Exchange (NSE) take a weighted average of the last half an hour's price activity.

Stop loss: Stop loss is an essential risk control mechanism. One should always keep it in mind while initiating a trade. Stop losses are generally given so that there is a level below /above which the market will tell us that the call has gone wrong. It would always be there.

Thanks

Here are few of my descriptions

Trend - The thing that changes as soon as you think you have figured it out

UpTrend - What happened before you bought a stock

Downtrend - What happened before you shorted a stock

Sideways Market - A period that starts when you have built a position and lasts until you have sold out your position

Support - A term you enquire with a Technical Analyst when the stock you have bought is going down

Resistance - Any random line which comforts you after you have taken small profits quickly

Open - A time to pray if you are a BTST trader or the Dow has crashed

High - A place where one buys

Low - A place where one sells

Close - Time allotted to brokers to make margin calls


CV

hi CV , that was great!


~Winston

hello c.v and winston,
in a way your quotes are quite right to the new entrants, who has no knowledge in trading and where your guidance will be most welcome. why don't you educate all these points catagorically with illustrations, please ?

Which terms do you require illustrations instalert?

hello cv,
thanks a lot for your immediate response.
i view charts in metastock pro, that i got installed afew days back.
1. for intraday trading, i took position when buy signal was shown on infosys - bought at 1990, went up to 1998 and then plunged down very fast) i didn't know when to exit. consequence - i lost afew bucks instead of earning.
2. went short on bhartiartl at 816, which went down upto 804 and gained very fast to 813, where i made my exit. here i gained only 3 per share instead of 12, due to not knowing when to square off.
i request you to advise me, whether there are any norms to follow that i missed in the above two tradings.

Good attempt Pradeecs,
Pl continue.
CV must be joking & infact one could learn a lot from him esp on day trading.
ranga

Well, believe it or not, what you have asked is something very complex and delicate and usually I dont respond to it.

Let me not get into the signal part, since your problems is exits, how about a simple trailing stop.You just seem to give away a lot of profits back, so here is a method. Calculate 30 min ATR of your stock, when you enter use it as your initial stop. If the stock moves in your favor just shift your stop along with price.That is one of the many ways to protect open profits.

Other alternatives - Trendlines, Channels, Trend change using an indicator etc.

Hi intaalert,

profit booking is the most important part for all traders. many prof also struggle on fine tuning this aspect.

Well, i suggest you to use 14 RSI in your trading time frame.
For your long positions: once you are on right side,
1) Wait for RSI to cross 70 ( after 70 cross it may go anywhere beyond it )and again return back 69. Exit your 50%
2) Trail other 50% to breakeven
3) Then again wait for RSI 14 to touch 70 and return back at 69.Exit ur 50%

if the trend is strong , you wont be trailed out and you will exit the second time RSI gives exit signal

* reverse for short positions, over sold 30 rule.

if the trend is weak and market ready to reverse ( mostly happens if u trade 5min charts) you will enjoy profits at RSI first exit and trailed out at breakeven.
It has worked for me since past two years on 5 min charts also. On 5min charts you will observe all types of markets~bull, bear, lamb, volatile bull, V Bear, V lamb etc...........


~Winston

Hello Intaalert,

here is the chart showing my short entry ( offcourse based on system signal)

and more important exits.

after first RSI exit, i was ready to trailed out till Breakeven, but breakeven did not come and i was out for 2nd RSI exit.

note breakeven will include all types of taxes and brokerage.

~Winston