Sanjeev Nanda – Technical Analysis
Technical analysis is a method of predicting the share price movements with the help of price graphs or charts. Price movement is the only criteria to predict future prices of stocks in technical analysis. A technical analyst is not concerned with the fundamental strength or weakness of a company, the prevailing economic situation, corporate performance or Government policies.
The realtime demand and supply for a particular stock determines the price of that particular stock at that particular time. Markets are manifestation of human psychology and they are driven by the emotional forces of fear and greed. These emotional forces influence and determine the demand and supply of stocks. Since the traders’ emotions and estimations change continuously for many reasons, the price of stocks will also fluctuate accordingly as per the demand and supply forces. These fluctuations serve as basis for technical analysis to predict future price movements.
Demand for any stock increases if the traders’ hope of profits increase. Supply of stocks increases if the traders’ fear of loss increases. The imbalance in demand and supply forces result in rise and fall of stock prices. Stock prices rise sharply if the demand for stock increases and stock prices fall rapidly if the supply for stocks increase.
Technical analysis is best suited for day traders since day traders are not concerned about the short term, medium term or long term price movements. With the help of technical analysis, a Trader can easily understand the demand and supply forces for a stock, the stock price trend and other factors to exactly predict what is going to happen to the price of the stock within few minutes or hours.
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