Whats the difference between

Fundamental analysis ( intrinsic value overpriced / underpriced , study causes ) Technical analysis ( study effect )

Technical Analysis Advantages

1- Buy / Sell timing ( very critical specially in high leverge future markets ) 2- Adaptability to any trading medium ( stocks, sectors, stock markets , futures )

3- The big picture advantage & avoiding the tunnel vision which result from following one group of markets
4- Can be applied in any time dimension ( ranging from 1 minute chart up to severl years chart )

Two main criticisms of the technical approach

1- The self-fulfilling prophecy ( this creates waves of buying or selling chart patterns are completely subjective ) ans : never the both , different positions & self-correcting

2- can the past be used to predict the future ?

Ans : the more deep I looked to the past, the more I can see the future , all research ( include fundamental analysis ) study historical data , simply theres NO other data available

Random Walk Theory

( Buy & Hold Strategy )

Market is random to those who do not understand it

( football example ), randomness gradually disappears as the skill in the chart reading improves

Why there are winners !? Bull and Bear markets , how did you determine it ?

Whats chart ?

Three basic principles of technical analysis

Price action discounts everything ( Supply & Demand ) Prices move in trends

History repeats itself

Whats candlestick ?

Candlestick contains open, high, low and close values for each time period you want to display. The hollow or filled portion of the candlestick is called "the body" (also referred to as "the real body"). The long thin lines above and below the body represent the high/low range and are called "shadows" (also referred to as "wicks" and "tails")

Support & Resistance

Support

Definition :

- A price level where demand are bigger than supply - When price is moving down, support is the price level that can stop the downward move as well as rebound from it - Any previous low is support

Support .. Why ?

Shorts covers bad positions create support

Investors who regrets not to buy a stock at certain prices usually find it a good opportunity to re-buy the stock , & that creates support
Good experience create support , imagine you bought a stock at 10 L.E , & it went up to 13 L.E , you sold it & u took 30% profit, what youre going to do if u find the same stock get back to 10 L.E which u bought it in the 1st place think about it !

Resistance

Definition

- A price level where Supply are bigger than Demand - When price is moving up, Resistance is the price level that can stop the upward move, and price can rebound from it as well

- Any previous high is resistance

Resistance .. Why ?

Longs covers bad positions create resistance Investors who regrets not to sell (short) a stock at certain prices usually find it a good opportunity to re-sell the stock , & that creates resistance

The Rule Of Alternation

Any broken support turn into resistance & vice versa Why ? Most often because of covering bad positions, as well as re-add to the old good position

Trendlines

How to draw a trendline ? Uptrend Downtrend Sideways channel

Significance of trendlines

Length of the trendline Number of times the trendline has been touched or approached Angle of ascent or descent ( slope )

Measuring implication ( minimum price objective ) of trendlines

Volume

Dow Theory

Intro

Created by Charles Dow

Charles Dow & Edward Jones founded Dow Jones Company in 1882 & published the first stock market average of 11 stocks ( Dow Jones Index )
Unfortunately, Dow never wrote a book on his theory, instead, he set down his ideas in a series of editorials in the wall street journal

Dow Theory Basic Tenets

1- The average discount everything
2- The market has three trends A- primary trend B- secondary or intermediate trend C- minor trend 3- Major trends have three phases A- accumulation phase B- public participation phase C- distribution phase 4- Averages must confirm each other ( industrial & rail averages ) 5- Volume must confirm the trend 6- A trend is assumed to be in effect until it gives definite signals that it has reversed (as the market is part of the mother nature, a physical law to market movement which state that an object in motion tends to continue in motion until external force causes it to change direction)