Technical analysis uses a very different approach of studying the stock market as compared to the fundamental analysis.It studies the historical trends of the stock prices in the market.Before starting the stock market technical analysis every stock analysts should have knowledge about important terms related to the technical analysis.Following are the seven most important terms related to technical analysis.
Relative Strength Indicator
The relative strength index is a indicator used in carrying out a stock market technical analysis.This indicator is utilized to chart the prices of a stock during carrying out the technical analysis.It provides very important and useful information about the historical strengths and weaknesses of an investment option.
Blow off is a unique type of market situation or chart pattern in which prices of stock move up and down in an abrupt manner.The rise and fall in the prices is also accompanied by steep rise and fall in the share trading volume.
This type of chart pattern is mostly caused by speculative trends in the market or sometimes due to actual news about the stocks.Blow off top and blow off bottom are the two most important chart patterns.
Consolidation is the price movements within a focused and fixed trading area.It is very important to locate the periods of consolidation for investors as it helps them in identifying short term gains in the market. The usual time periods of the consolidation is minutes,hours and days etc. Long periods of consolidation are also called base and they span for more than years of time.
Market depth is a very important technique used to conduct stock market technical analysis.it is sued to carryout detailed stock market research.It provides a detailed list of the people interested in the buying and selling of the particular stock.
Market depth list contains details about the buyers and sellers of the stock,total number of shares of the stock being traded in the market,different trading prices and volume of the shares traded of that particular stock etc.
Climax is a situation when stock or commodity achieves a highest or lowest price in a giv en market.Buying climax and selling climax are the two types of climax in the market.Buying climax is identified by highest price and high trading volume and selling climax is identified by lowest price and high trading volume.
Market resistance is the point which is totally opposite from the market support point.Stock or commodity finds a resistance point when its prices start falling after reaching this point.Stock or commodity finds this point during its upward journey.
Market resistance is the point which is totally opposite from the market support point.Stock or commodity funds a resistance point when its prices start falling after reaching this point.Stock or commodity finds this point during its upward journey.It is very important for the stock market technical analysis to know about this point as it makes easier for them to devise future investing strategy for their future investment options.