Introduction to Technical Analysis

Introduction to Technical Analysis…

How Should We Study to the Graphics?

SCALES: 1. Linear Scaling 2. Logarithmic Scaling

In linear scaling, candlestick charts are drawn directly based on the price, while in logarithmic scaling, they are drawn based on the percentage change compared to the previous price. The same scaling should always be maintained throughout the work.

Introduction to Technical Analysis

Evaluating price movements together with transaction volume gives even more meaning to the analysis.

Technical analysis does not tell us the future. It just shows what happened in the past and what is happening now.

If the prices exceed the target value after making a purchase, it is not necessary to sell at the target value. In this case, prices should be followed.

All investors face three basic questions:

1. What should I invest in?
2. When should I buy it?
3. When should I sell?

Technical analysis provides an substructure to answer these questions.

The biggest enemy of the investor is “Emotion”.

Although the basis of technical analysis is mathematics and statistics, it also includes human psychology. Although technical analysis may not give one hundred percent accurate results, it will give results close to seventy or eighty percent.

To be a successful investor, it is important to know fundamental analysis as well as technical analysis.

Dow Theory in Technical Analysis

Dow theory has 6 basic rules:

1. Prices reflect all kinds of factors and investor expectations.
2. The market fluctuates in trends. There are three main trends: Major trend, Secondary trend, Minor trend.
3. Major trends go through three phases. (Accumulation, Movement, Excess)
4. Market indicators and prices should support each other.
5. Trading volume should confirm the trend.
6. The current trend continues until signals that the trend has changed are received.

Next chapter: Technical Analysis: Candlestick Charts and Their Interpretation

First chapter: Investment and Technical Analysis

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