A continuous uptrending stock market is a historical occurrence. Stock markets are now extremely volatile since their movement is influenced by a plethora of complicated variables. The instability has taken on a new dimension as a result of globalization. One can no longer rely on a buy-and-hold strategy. Volatility and inflation will chip away at your results if you adhere to the same old buy-and-hold strategy. A quick glance at your buy-and-hold portfolio since 2008 will confirm the above assertion. Let’s look at how following the fundamentals of technical analysis may help you maximize your profits.
What is the definition of technical analysis?
It’s a process used by traders and investors to forecast the price movement of an asset by analyzing historical market data, especially price and volume. This strategy isn’t foolproof, but it does add a trustworthy dimension to your research. Courses such as FXTC – Master the Art of Technical Analysis will boost your profits and prevent you from making costly financial blunders.
Basic Steps of Technical Analysis
Spotting the trend
Technical analysis makes it simple to determine the market’s overall trend (Up Trend/Down Trend/Range Bound). You may do so by looking at the Nifty Yearly/Monthly/Weekly chart. To make an informed selection, you must first determine if the market is in an uptrend or decline. If you are in an uptrending market, a buy-and-hold strategy will benefit you. It’s best to record profits and be cash wealthy at the onset of a slump. I know it’s difficult to find the exact top but even if you do not exit at the right moment, the market will give you another chance as you are in cash. Once the downtrend is over you can again enter the market and ride it till the top. Because of persistent volatility, you will get n number of chances of entry and exit.
Obtaining both support and resistance
Once you’ve established the market’s trend, the following stage is to determine the best entry and exit points for individual companies. If you’re new to the stock market, it’s best to stick to large-cap stocks. Let’s imagine you like stock A and want to purchase it. According to technical analysis, you should not buy in the stock naively. You should first try to determine what is the best price you can purchase it for. Using the fundamentals of TA, you may quickly determine the stock’s support/resistance price. It’s fairly usual for equities to test their support levels in a tumultuous market. Wait for a few sessions and you’ll have an opportunity to buy the stock at its support level. Similarly, the resistance of a stock may be used to determine the ideal price at which to exit a position. To keep things simple, you can purchase at support and sell at resistance. Ride the support and resistance sine wave until the range is broken. Stop losses should be kept below 1% of the support price.
The Initial Step
Technical analysis that has done courses like FXTC – Master The Art of Technical Analysis recognizes that markets are influenced by human perceptions of fundamentals rather than by fundamentals themselves. As a technical analyst, you must examine the following information:
Use Stock yearly/monthly/weekly charts to find current and historical prices.
Use Stock yearly/monthly/weekly charts to calculate current and historical volume.
Use Nifty/Sensex yearly/monthly/weekly Price Volume charts to determine current and historical market breadth.
If you’re not sure where to begin, get advice from a professional or a friend who performs this discipline. There is a wealth of information available online, as well as a number of excellent publications. It’s worth investing a few dollars and hours to master this technique since it may turn into a moneymaker for you.