Technical Analysis (TA) has an advantage that it can be used on any asset class with past price trend data. The data that is required is related to price information, i.e. open high, low, close, and volume information.
This analogy can be applied to how to learn and apply technical analysis. Just as driving a vehicle does not require much effort once you learn it, the same goes for TA.
TA is especially advantageous due to its applicability to multiple assets. As opposed to other stock market research methods, such as fundamental analysis of equity, which requires the study of the profit and loss, balance sheet, and cash flow statements, TA can be applied regardless of the asset type.
Once you master the process, you will be able to apply it to any type of asset, such as stocks, commodities, foreign exchange, bonds or other investments.
However, the fundamental analysis of commodities follows a different approach.
When analysing an agricultural commodity like Coffee or Pepper, the fundamentals are quite different to those of a metal or energy commodity. Therefore, it is important to consider rainfall, harvest, demand, supply, and inventory when making an investment decision as these factors can vary from one type of commodity to another.
No matter which asset is being examined, the fundamentals of technical analysis will remain constant. For instance, indicators such as ‘Moving Average Convergence Divergence (MACD) and ‘Relative Strength Index (RSI) are utilised in the same fashion for stocks, commodities, or foreign exchange evaluation.
The assumption in Technical Analysis
Unlike fundamental analysts, technical analysts pay no attention to the company’s worth. They only focus on the stock’s past trading data like price and volume. This is done to gain an understanding of its future movements.
Technical Analysis is based on several foundational assumptions, and knowing them is necessary to make the most of this analytic tool.
Price movements in the market occur as part of a trend. Technical analysis is built on this concept. Ultimately, when a trend is established, the price follows it.
History tends to repeat itself in the world of technical analysis as well. This is because market participants tend to interact with price movements in similar ways regardless of the price’s direction.
For instance, when prices rise, people become greedy and seek to buy even at a high cost. In contrast, when prices decrease, traders quickly offload their stocks regardless of how low the cost may be. Such consistent behaviour has been mirrored for years. History indeed repeats itself.
© 2021 BP Equities Pvt. Ltd.
All Rights Reserved
By signing up, you agree to receive transactional messages on WhatsApp. You may also receive a call from a BP Wealth representative to help you with the account opening process
Disclosures and Disclaimer: Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by BP Equities Pvt. Ltd. Investors should consult their investment advisor before making any investment decision. BP Equities Pvt Ltd – SEBI Regn No: INZ000176539 (BSE/NSE), IN-DP-CDSL-183-2002 (CDSL), INH000000974 (Research Analyst), CIN: U45200MH1994PTC081564. Please ensure you carefully read the Risk Disclosure Document as prescribed by SEBI | ICF
Attention Investors
Issued in the interest of Investors
Communications: When You use the Website or send emails or other data, information or communication to us, You agree and understand that You are communicating with Us through electronic records and You consent to receive communications via electronic records from Us periodically and as and when required. We may communicate with you by email or by such other mode of communication, electronic or otherwise.
Investor Alert:
BP Equities Pvt Ltd – SEBI Regn No: INZ000176539 (BSE/NSE), INZ000030431 (MCX/NCDEX), IN-DP-CDSL-183-2002 (CDSL),
INH000000974 (Research Analyst) CIN: U45200MH1994PTC081564
BP Comtrade Pvt Ltd – SEBI Regn No: INZ000030431 CIN: U45200MH1994PTC081564
For complaints, send email on investor@bpwealth.com
