Sunday, July 11, 2010

Technical Analysis Of Stocks : a mirror image of Market Psychology

A month back I attended a workshop on Technical Analysis of Stocks. Instructor was Mr. Sajay Ved from BSE. A 42-43 yr old guy having 22yrs of experience in Stock trading and have good hand on Technical Analysis tools. He's not only master of TA of stocks but also a wonderful educator who can communicate his knowledge along with interesting real life examples.

He said few things that really impress me a lot and on that moment only I’ve decided to share it with my all friends.

Here are few glimpse of it

-->What is Price?

Price is a perception of ppl , willingness.

-->What is Market then?

Its collective perception. It's within you.

--> Power of Price: "If you won't respect the price, Price won't respect you."

--> " All good technical analysts are not good traders ,but all successful traders are subconciously good analysts .

--> Trading in market is

  • 80% Knowing Psychology
  • 10% Adopting Strategy
  • 09% Using Methodology
  • 01% Luck

--> A person should Know

  • When to Press and When to GAS
  • When to hold, when to fold

--> A good trader has to be like Sniper

  • Who keeps on scanning the environment very fast.
  • Good eye sight
  • has to patient

--> Difference between

  • Prediction and Anticipation

Prediction comes out of intuition, while anticipation can be done from past experiences. So technical analysis provides you ground for the Anticipation

  • Interest and Commitment

-->"Bulls make profit; Bears make profit, only Greedy ppl loose money"

--> Bring self Discipline to your trades, either mental discipline...or in terms of Stop loss.

--> Fundamental changes 4 times in a year when quarterly reports are published. While market changes every next moment.

  • Fundamental analysis helps you "What to Choose (particular script name)?"

  • Technical Analysis helps you "When to choose (timing for entry and exit)?"

--> Knowledge is NOT power, but APPLICATION of knowledge is power.


What I learn out of it is... Technical analysis is tool by which one can measure the markets commitment in either direction. Trend line & Moving avg. shows the market Psychology in Numerical term. Candlesticks are amazing tool for anticipating market's pressure in either direction.

Most of the tools except Candlesticks are based on Statistics...and we know the power of statistic. There was so many candidates in workshop were Old aged Traders who spent 5days of week and from 9am to 4pm each day in front of terminal. They all have came with few conventional wisdom , which can be seen throughout the workshop in their arguments with Sanjay. Throughout the session Sanjay tried to convey them the Message that technical analysis is nothing but market's mental graph . And if you can read it very well then you can anticipate the next move. There are so many tool available in Technical Analysis.Sanjay said one very imp thing…for that "Trader should use appropriate tool at appropriate time... When enemy is faraway use Bow & Arrow and if it closes use Sword".