Lesson 2 - The assumptions and the basis of discussion around the application of technical analysis in stock market

The analysis assumes the technical basis is the study of market volatility, primarily through the use of graphs aims to predict the trend of price volatility in the future. The term "market volatility" refers to three variables ...

 The base assumptionsTechnical analysis is the study of market volatility, primarily through the use of graphs aims to predict the trend of price volatility in the future.
The term "market volatility" refers to three main variables to provide information for the Technical analysis is the price, trading volume and number of contracts not settle.
There are three assumptions as the basis for access to Technical Analysis:- Movements in the market reflect all;- Move with world prices;- History will repeat itself.
Market volatility reflects all:
This may be considered on the basis of Technical Analysis. Any theories, other analysts want to be accepted, you must first understand and accept this assumption. The technical analysis for any factors that can affect the price such as psychology, political or financial factors of the business or organization. . . are reflected in market prices. Thus some have argued that the study of price movements is all what we need and can not really oppose the idea.
On the basis of common understanding about the price reflects the fluctuations in supply and demand. The technical analysis shows that when prices rise even though, for whatever reason, then demand to exceed supply and market prices. We all know and agree that the main driving force of supply and demand are the basic economic factors, they do shape up Bull Market or Bear Market, but the graph itself does not make markets move up or down. Graphs can only reflect market conditions only.
Price movement in the trend:
The concept of trend is extremely important concept in technical analysis techniques therefore need to understand about this assumes that you want to learn more about it deeply. The purpose of the establishment of a graph depicting the changes in the market price is to identify trends early reviews, which will enter into transactions on the basis of these trends. Actually here is technology that automate repetitive trends from the previous price is the purpose of technical analysis is to identify the repetition of these types of price volatility in the past appeared to can leverage the experience and make decisions accordingly.
From this assumption we also have a result as "a business trend in motion will continue the trend of it and rarely reversible." This result derived from the law of one of the movements of Newton, so it is a statement as follows: "a trend in motion will continue the trend until it its reversal." Look common to all research-based approach to the trend were to follow the current trend of prices until signs of reversal.
History will repeat itself:
Most of the content of technical analysis and the study of market volatility must be aimed at the study of human psychology. Such as pricing models, these models have been identified and demonstrated for over 100 years, they like the picture of the price movement chart. These pictures shows the psychology of the market is going up or down. The application of this model has worked effectively in the past and assume that will continue to be effective in the future because they are based on analysis of studies of human psychology that human psychology is often not changed. Thus this assumption can be stated that: "The key to capture the future lies in the study of the past" or "the future is just a repetition of the past"
The debate surrounding the application of technical analysis in stock market
Prediction of fundamental analysis as opposed to in the Technical Analysis
While Technical analysis focuses on the study of market volatility, the analysis focuses on the basic economic forces of supply and demand - the cause of price movements. Fundamental analysis approach toward analysis of the relevant elements affecting the market price in order to determine the real value of a stock - the value is determined by supply and demand and ultimately to determine the point of sale market on the actual value (overprice) and points sold under market value (underprice). Both approaches the fundamental analysis and technical analysis are to identify trends that prices may move but the approach is different: the fundamental analyst studies the causes of the variable while the home market analysis techniques to study the impact of the changes it.
Some investors consider themselves followers fundamental analysis or technical analysis but there are a lot of repetition: Many analysts have applied the basic principles of technical analysis in their work while his most technical analysis much less have time to follow the basic analysis.
Often in the beginning stages of a number of important changes in the home market Fundamental analysis does not explain and do not support what the market prepared place. It was at the time of this sensitivity analysis are two schools that showed the most different. These two schools returning to the same at some point but if the investor wants to rely on those points to make sure the basis for its decision, it will be too late.
One explanation for this contradiction is "the role the market price guide for the analysis of basic research" or you can say the market price as an indicator for leading the fundamental analysts. Those studies of technical analysis can be found that price changes have an impact on the market, or that they have the rhythm of the market, and those who follow fundamental analysis to be affected that fluctuations. The time market prices surged and serious discounts are recorded in history are often due not aware or less aware of the changes and market fluctuations until it is widely acknowledged then redirect itself and move in another direction then.
And timing analysis are opposed to each other?
Return to Technical analysis, decision-making process can be divided into two phases and timing analysis. With the market "leverage" such as major futures markets (markets with the derivative instruments such as futures - futures and option contracts - Options), the determination of the time involved in a very important role by fully analyze your case and in accordance with market conditions but you can still lose money. Whether the deposit level for the future market is small (only about 10%), then even a very small price movement in the wrong direction can influence investors pushed out of the market and take the entire amount deposit it. Contrast in trading on the stock market, when an investor discovered he was deviating from the market for a certain class of shares, he just simply hold that stock and wait until back stock market trends. Those who invest in the futures market will not have that privilege. Strategy "buy and hold" does not apply to investment profits on the futures market.
When the analysis can be applied in accordance with fundamental or technical, but to answer the question of timing entry and exit from the market, the answer lies entirely in Technical Analysis. The timing is very important to buy or sell decisions. Thus when considering the steps taken by investors before making a final decision can be seen the application of the principles of technical analysis is not to be missed at some point of the process decide whether in the first part of this process when conducting investment analysis can be applied as fundamental analysis.