Firststands: Technical Analysis Part 3

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Firststands Technical Analysis Part 3
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Technical Analysis
Lets begin with a quick recap of what we have
learned so far. We learned the process of opening
a trading a D-mat account. How to trade with a
quantitative edge and how to build a trading
system. Do you know there is a psychology
involved when it comes to practicing technical
analysis, and we can anticipate emotions like
fear and greed, and this is only possible once we
understand the psychology behind candlestick
charts and patterns, and thats what we are gonna
learn today. Todays episode will be a pack full
of knowledge that is something you are going to
be carrying for the rest of your life.
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First of technical analysis is the study of money
movement, So there are few things you know about
price action HISTORY TENDS TO REPEAT ITSELF
lets look at a cycle, every winter you can buy
air conditioners at a lower price and in summer
you can sell it on higher price because the
demand is higher, it is a human mentality that is
not going to change, a normal person will go to
buy an air conditioner in winters, people would
probably say that but they wont, A trader would
probably do that. The same thing causes fear and
greed no matter the time frame you are in. The
second price auction is MARKET TRENDS there are 2
types of market trends, lets understand with some
pictures.
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UPTREND
When the graph scales and shows upward movement
of assets.
DOWNTREND
The movement of coin/stock towards a lower price
from the previous state
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when you look at the uptrend, every time there is
a dip that is higher than the previous, it
becomes the higher low. The picture above is a
candlestick chart. If you want to study some
companies' charts you don't have to see every
detail, just mark the higher lows and the lower
high to figure out, Is it an uptrend or a
downtrend?
with some examples Lets, divide this chart in
parts, so from June till mid-August, you can
clearly see that there is a downtrend, but from
mid-August to September the higher lows are
approximate same, lets call it as a side-trend,
from September till end the chart is clearly in
an uptrend, by just marking the higher and lower
points you can determine the type.
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Market Discount
The third price action is MARKET DISCOUNT
EVERYTHING which means, If there is some news or
analysis that the market knows is going to happen
it will already be reflected in price. Why is
that? Because they suck genius, smart people
reading news, understanding everything, listening
to management calls, they will make inferences
and theyll think this is going to happen in 3 or
6 months which the retail investor cannot know.
So, if there is an analysis, thats going to
happen after 6 months in a company, and retailers
dont know but a group of big investors know and
lets say they sell. That is the signal for
people to be like there is something going to
happen.
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Once the news is broadcasted, its probably
already been there for a while, so if you are
following the news, you will probably be really
late. An example in June 2020 a big company
called reliance said we will become debt-free.
There is a lot of debt, millions of dollars and
the market was like damn, and the market gapped
up. It was positive news and favored Reliance but
now the market knew, analysts started following
it. The deal was gonna happen and much later
Facebook invested, Google invested. Approx. 20
million dollars were invested. In the annual
general meeting, Mukesh Ambani (CEO of Reliance)
said we raised so much money and claimed to be
debt-free, partnered with Google and Facebook,
now the common people will think, it is great and
they probably buy Reliance on that news, but that
is when reliance fell. Because that news was
already priced in, When news is out most of the
time, The market already knows whats happening.
SO, THE TRUTH IS ONLY VISIBLE IN THE PRICE CHART.
FOLLOW THE PRICE CHART NOT NEWS.
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TECHNICAL IS THE READING OF PRICE MOVEMENT
THROUGH THE USE OF CANDLESTICKS AND UNDERSTANDING
PATTERNS, TRENDS TO GAUGE DEMAND AND SUPPLY.
In the next part we will be studying the
structure of candle chart types of candle charts.?
If you want to learn trading so must read earlier
one tradinggt technical analysis1 gt technical
analysis2
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