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Making of a Technical Analyst

An Indian Perspective

The term “Technical Analysis” evokes various reactions from people associated with the capital market which range from wonder, amazement, “I told you so” to utter disbelief. A relatively new concept in the Indian stock markets (relative is indeed a relative term as frequent mention has been made of this subject for the past 10 years or so while the Bombay Stock Exchange has been in existence for more than 125 years) what with liberalisation of the economy and the entry of FII’s (Foreign Institutional Investors) who have taken to the capital markets in a big way, technical analysis has gained popularity over a period of time.

Though resistance still prevails in various pockets, the recent introduction of derivative products (read as futures and options) has seen enthusiasts pursue the subject with renewed vigour not to mention the media (in print, internet and television) coverage to chartists (technical analysts are popularly referred as chartists). If one were to scratch the surface, indeed technical analysts have been around for decades but basically under wraps. Before the advent of computers in the country, few die hard chartists used elephant size graph paper for maintaining their charts which would obviously be limited in number as they would have to be physically updated everyday. In fact 3 different charts were maintained for a single scrip (daily, weekly and monthly) and this would make it a virtual full time profession where erstwhile “bhav” copies or newspapers would be preserved for years on end to maintain data.

The author of this article has been fortunate enough to interact with such “masters” (who have been practitioners of technical analysis for the past 40 years or more, when probably a handful of people in the country were even aware of the subject) and has also been a recipient of their pearls of wisdom. It has been an extremely enlightening interaction, which cannot be substituted or replicated in any form, or by any training manual. The unfolding of an Elliot Wave formation is a joy to behold when seen on a manually plotted graph of 1/16th scale and the author can attest to this fact that patterns are best identified on such graph papers rather than on computer monitors.  

Needless to say, technical analysis is an invaluable tool for various sectors of the capital market – be it an investor, speculator, day trader, broker, arbitrageur, jobber, portfolio manager or a fund manager. Judicious use by a skilled practitioner along with an ideal mix of fundamental analysis could conjure up a potent and formidable combination, which could be hard to beat.

Contrary to perception that fundamental analysis and technical analysis don’t gel together (obviously there could be clashes from time to time), they do get along and when they actually click (read as match) it could turn out to be a heady concoction and extremely financially rewarding to the sincere practitioner.

The Essence Of Technical Analysis

Technical Analysis is in essence all about timing your investments (or trading positions) at the stock markets (profitably, of course) and although this module is aimed at those not acquainted with various technical terms, it is assumed that the audience has some familiarity with the capital markets.

Technical analysis is the process that helps one to minimise losses and lets profits run. However, as with most practices, it must be kept in mind that these are tools that help in beating the odds and are not the panacea for all developments at the financial markets. If things

were so simple than this author would not have indulged in consultancy of any form and would have restricted himself to personal trades only. 
 
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