The entire Technical Analysis broadly divided in to Three types, one is purely chart analysis and second is chart analysis with the help of indicators (here indicators means leading indicators & lagging indicators) and third Theories.
PURELY CHARTS ANALYSIS:
For Chart Analysis we follow 3 types of charts.
Stage 1. Line Charts Analysis:– For Long term Trends Identification & Short term Trends identification
Stage 2. Bar Charts Analysis:- To know Trend reversals in short term
Stage 3. Candlestick Charts Analysis:- To know Trend reversal in short term
STAGE I: LINE CHARTS:
The Line charts drawn with the help of closing prices. These line charts are plotted on daily, weekly and monthly closing price basis.
In the daily charts we use daily data and for the weekly and monthly charts we use weekly and monthly data respectively.
The prices are plotted on the XY Chart; where the X axis represents the time and Y axis represent the value of the Scrip.
One more important point the X axis represents the actually trading days and not the calendar days.
Here in technical analysis we discuss different types of trends (Direction of Movement) and patterns (Models or Shapes) with the help of line charts.
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