103-01 What is technical analysis of stocks?

What is the technical analysis of stocks?

Stock Market Technical Analysis is the study of supply and demand in the stock market by comparing the history of stock price movements & volume. The science/art of technical analysis usually falls into different areas of study:

Supply & Demand.

Supply and demand entail the study of stock price movement vs. volume. Volume is the number of shares traded daily; this gives us insights into supply and demand when used in conjunction with the stock price movement.

Course 103: Technical Analysis & Stock Charting
What is the technical analysis of stocks?

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Price Trends

Understanding price trends and using trendlines helps to understand a stock price’s past and future direction.

Waves & Cycle Analysis

Waves and cycles analysis is about how markets move and what external factors impact the movement.

Stock Charts

Plotting stock prices and volume in stock charts enables visualization and understanding of the stock or market index history. The use of Bars, Candlesticks, or OHLC charts is common.

Price Indicators

Price indicators enable us to interpret stock market sentiment. It is important to understand price-based chart indicators or oscillators such as Stochastics, Relative Strength Index (RSI), Rate of Change (ROC), Moving Averages (MA), Moving Average Convergence Divergence (MACD), Parabolic SAR, and the Average Direction Movement Index (ADX).


Understanding how volume level is related to price and how price relates to volume is particularly important.

Study of Price Volume Indicators

Indicators that combine price and volume can be very effective. Typical indicators are On Balance Volume (OBV), Chaikin Money Flow (CMF), Time Segmented Volume (TSV), and MoneyStream (MS).

Market Sentiment

Market sentiment is understanding the madness of crowds and the overall level of fear and greed in the market.

The Pros of Technical Analysis

If taught correctly, technical analysis can help you understand one side of the stock market equation. This is the “effect” part of the cause-and-effect equation.

Technical Analysis Studies the:

  • What – What has just happened
  • Effect – The effect of market action, not the cause
  • Market action – what is happening in real-time at the moment
  • The price
  • The volume – supply and demand
  • The trends

The Cons of Technical Analysis

Using only technical analysis may cause people to oversimplify the market. Learning how to assess a company’s financial fundamentals and view the technical situation in the charts is worthwhile.

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