B. TECHNICAL ANALYSIS
Understanding Technical Analysis
Technical analysis is a method for predicting price movements and future market trends or securities by studying the graphs of past market action taking into account the market price of instruments and interest in those instruments. Technical analysis is one of the analysis or method approach that evaluate the movement of a stock price, futures contract, index and some other financial instruments. In short, technical analysis can be regarded as the analysis of securities by using price charts and historical volumes.
The advantages of using this technical analysis for investors in trading on financial instruments are:
A. Technical analysis can be applied to any type of securities or securities in any market. As long as these securities have historical data with a successive time and can be drawn graphs of the time sequence, then the securities can certainly be analyzed with technical analysis.
B. Technical analysis can determine the time to buy and sell shares.
C. Technical analysis can be applied to various dimensions of time, either daily, weekly, or for longer periods of time.
D. Technical analysis can provide high returns only by studying the existence of a certain change in the market before moving towards a new equilibrium.Principles and Rationale of Thought
According to (Sulistiawan and Liliana, 2007: 5) there are three basic assumptions or assumptions used in technical analysis are as follows:
A. Market Price Discounts Everything (The Market Takes into All Issues)
Users of this analysis believe that all events can be very influential on stock prices. The event or event will be reflected in the stock price instantly. A securities market is said to be more efficient if all information is rapidly absorbed by the market and there is no barrier for all market participants to access that information.
B. Price Moves In Trend (Moving Price Following Flow Direction)
The next basic principle in the use of technical analysis is that never make a transaction decision against the current price trend. Since the analytics user believes that all information is reflected in the stock market price, then the trend shows the attitude of market participants or investors over a stock price. Understand the trends first and follow where the trend will move in order to take advantage of market price movements to improve investment returns.
C. History Repeats Itself (History Will Be Repeated)
In technical analysis also illustrates the psychological factors of market participants, then the historical movement can be used as a reference to predict price movements in the future. This historical pattern can be seen from time to time in the graph. These patterns have meaning that can be interpreted to predict price movements.Classification of Technical Analysis
In general, technical analysis is classified into several classes. Classification in some classes is divided into 2 main classes that are distinguished as follows:
A. Classical Technical Analysis
Users of technical analysis is commonly referred to as chartist.Pengimananya believe that trends and market action signal a stock can be obtained based on the form and a particular pattern of stock price charts. Another form of analysis is the use of analyst lines applied to the price graph according to individual user opinions. Therefore, the basis of transaction decision-making is usually also determined by judgment and user interpretation of a graph. Given its very subjective nature, then this analysis contains more art than the scientific element. Similarly, that according to each user's analysis This is also specific to each of these securities. This group of analysts can be classified into a price-line analyzer and a pattern analyzer.
B. Modern Technical Analysis
Users of this analysis commonly referred to as technician.Pengesananya believe that trends and market action signals a stock can be obtained based on the pattern of graphics determined or indicated from quantitative calculations, not subjective interpretations of a form and pattern graph. Given its quantitative nature, the method This can be scientifically tested ability and performance in generating profits for investors. Another advantageous factor of this modern technical analysis is that the indicator can be programmed automatically using computer help. Broadly speaking, these technical indicators can be grouped into in-categorized trend followers and oscillator indicators.Terms - Important Terms in Technical Analysis
In technical analysis, there are important terms to know, namely:
A. Chart (Graph)
The main tool used in technical analysis is a chart that is used to describe the pattern of price movements in the past. The use of charts makes the assumption that if the current or future pattern of price movements resembles the pattern of price movements in the past, then most likely future price patterns will follow the pattern of price movements in the past.
Three main graphical methods are often used:
- Lane Chart, widely used by chart users, vertical axis represents price, and time horizontal chart. On daily lane charts certain marks are made to show the highest, lowest, and closing prices of the day. Price information for the following days will be plotted to the right of today's price.
- The average moving chart, is a very popular method for predicting the prices that technical analysts use. This chart is calculated for any timeframe you want, for example 3 days, 5 days, 10 days or more. The advantages of this method is to smoot out (smoot out) any movements that are not normal that may apply between days.
- Point and number chart (PAF), this method requires intrahari information (pricing information for every day trade) that is not normally earned by regular investors. This chart reports the price along the horizontal axis without paying attention to the timing of the trade.
In technical analysis, known several kinds of charts, including: - Line Chart (Line Graph)
This technical analysis contains only a line connecting one trade closure to another per day. For example, if on the first day of trading the price ends at 300, and the second day closes at 200, and the third day at 400. Then a straight line can be taken from 300 to 200 and then 400 from left to right. Sample image :
A line chart technical analysis has a clear and smooth movement but does not provide the highest, lowest, and opening price information for each session, resulting in fluctuations in market technical analysis not being seen during the period.
- Bar Chart (Bar Chart)
The technical analysis of the Bar Chart shape resembles a rod that has a stalk on the left and right, and has more complete information, containing the opening price, the highest, the lowest and the closing. The open market price is on the left stalk, and the closure on the right stalk. Representing the highest and lowest prices in a single trading period.
The bar graph is effective to describe the data very much. The bar graph looks relatively thin, it allows the user to add some more bars before the graph looks more complicated. If you are not interested in the opening price, then the bar graph is the ideal method to analyze the closing price , Relative to the highest and lowest prices. Bar charts in which there is an opening price will quickly look complicated. If you are interested in the opening price, then the candlestick chart is a better alternative than the bar chart.
- Candlestick Chart (Candlestick Chart)
Candlestick technical analysis is the oldest chart found by technical analysts. The body structure resembles a candle, and has the same element as the bar chart, there are opening, highest, lowest and closing data at each session. The rising prices are usually formed with light colors, and the price falls with dark colors. In addition to functioning as one type of graphics, candlestick also has its own analysis model that has been widely used by traders in the world.
- Point and Figure Chart
The graphic method shown above plots one data point at each time period. Any price movement, a day or a week represents a single point, a bar, or a candlestick plotted to signify price movement. Unlike the method, the point & figure charts are based on price movements, and do not take much time in considering them. There is an X axis on this graph, but it does not cut the graph.
The advantages of point & figure is its simplicity. There is no irrelevant price movement, there is no duplication of the graph. Only price movements are specific. This focus on price movement makes it easier to identify the support and resistance levels, bullish Breakouts and bearish breakdown.
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