2.1– Overview In the previous chapter we briefly understood what Technical Analysis was all about. In this chapter we will focus on the versatility and the assumptions of Technical Analysis. 2.2 – Application on asset types Probably one of the greatest versatile features of technical analysis is the fact you can apply TA on any asset class as long as the asset type has historical time series data. Time series data in technical analysis context is information pertaining to the price variables namely – open high, low, close, volume etc. Here is an analogy that may help. Think about learning how to drive a car. Once you learn how to drive a car, you can literally drive any type of car. Likewise you only need to learn technical analysis once. Once you do so, you can apply the concept of TA on any asset class – equities, commodities, foreign exchange, fixed income etc. This is also probably one of the biggest advantages of TA when compared to the other fields of study. For
.1 – Overview The previous module set us on a good plane with the basic understanding about the stock markets. Taking cues from the previous module, we now know that developing a well researched point of view is critical for stock market success. A good point of view should have a directional view and should also include information such as: Price at which one should buy and sell stocks Risk involved Expected reward Expected holding period Technical Analysis (also abbreviated as TA) is a popular technique that allows you to do just that. It not only helps you develop a point of view on a particular stock or index but also helps you define the trade keeping in mind the entry, exit and risk perspective. Like all research techniques, Technical Analysis also comes with its own attributes, some of which can be highly complex. However technology makes it easy to understand. We will discover these attributes as we proceed along this module. 1.2 – Technical Analysis, what is i