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Basics of Technical Analysis
Introduction to Technical Analysis
Technical analysis is a method of evaluating securities by analyzing statistical data, primarily price movements and volumes, to predict future market behavior. This approach relies heavily on charts and various indicators to identify patterns, trends, and potential trading opportunities. By studying historical price data, technical analysts aim to forecast future price movements and make informed investment decisions.
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Basic Terms Used in Technical Analysis
Open: The price of the first trade in a particular period. (E.g., intraday chart: first price of the day; hourly chart: first price of the hour)
High: The highest price a stock traded during a particular period. (E.g., intraday chart: highest price of the day)
Low: The lowest price a stock traded during a particular period. (E.g., intraday chart: lowest price of the day)
Close: The last price at which the stock traded during a particular period. (E.g., intraday chart: last traded price of the day)
Volume: The number of shares traded during a particular period or the number of shares that changed hands.
Open Interest: The number of contracts with open positions in the futures and options market.
Bid Price: The price at which a buyer is willing to pay for a share.
Ask Price: The price at which a seller is willing to sell a share.
Technical Charts: Visual representations of historical and current price movements.
Types of Charts:
Line Chart: A chart showing the closing prices of a share over a particular period.
Bar Chart: A chart showing the open, high, low, and close prices of a share on a single bar.
Candlestick Chart: A chart showing the open, close, high, and low prices of a share, with the body of the candle indicating the open and close prices.
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