Technical Analysis Terms

Technical Analysis Terms


There are two types of analysis, fundamental as well as technical analysis. Fundamental analysis takes in to consideration the fundamentals of the company, whereas technical analysis tracks the stock prices on the basis of the market movements. All the securities which are traded on the stock market have open price, close price, the high price and the low price for all the trading days. All these are represented in graphical form that helps us to show the trend.

You can compare the price for one period to another period. In addition, technical analysis also enables to forecast on the basis of the trends revealed. Thus, the basis behind doing the technical analysis is that price discounts everything even the fundamentals. Fund managers and many experts do no consider technical analysis as a sole method of evaluating the company’s price.

Following are the technical terms explained in simple language for a layman:

Resistance and support:

Ever stock has resistance as well as support level. Resistance level is the level at which price is having resistance from buyers, and the support level is the level at which the price is having support from buyers. In short, resistance level is the level at which market stops rising as the sellers exceeds the no of buyers. Whereas in case of support level, market sees lot of buyers entering the market and rise due to that.

Break out point:

There are certain points, where market finds resistance or support. These points are called as break out points. During the break out point, there is rush of buyers as well as sellers. As a result, investors buy when the price is above the level of resistance and sell when the price falls below the support level.

Intra day volatility:

Prices keep on changing during the whole day of trading. This change of price is called as intra day volatility. Volatility can be high or low depending on the change in price and price movements.

Regression line:

While doing the technical analysis, regression line is drawn through the middle of data points set encircling a certain period from the day of significant high to the day of significant low or from the day of significant low to the day of significant high. A linear regression line is also described as best fit line, as it best fits the prices between a starting price point and ending price point. Regression line helps in determining the trend direction. Traders in the stock market, look a regression line, as the fair value price of the securities.


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