Analysis of stock prices. Stock market analysis: principles and methods
Technical analysis is the analysis of price changes using charts in order to determine the direction of price movement in the future. TA is based on 3 sources of information: prices, trading volumes and time. Unlike fundamental analysis, technical analysis does not contain information about the reasons for price behavior. It already takes into account price movement in one direction or another and, based on certain identified patterns in the past, makes it possible to more likely identify the occurrence of certain events, namely a rise or fall in prices in the future. TA has both many supporters who make money in the market, and many opponents who claim that TA is a pseudoscience invented by lazy people who do not want to conduct a detailed study and analysis of financial assets.
History of origin
Technical analysis originated in Japan back in the 16th century. Its ancestor is considered to be Munehisa Homa, a representative of the oldest Japanese dynasty of merchants. At that time, rice was the main commodity traded on the stock exchange in Japan. Munehisa approached the issue of trade so carefully that he studied the entire dynamics of price changes over the past hundred years. As a result, he derived certain patterns of price behavior under certain conditions. Based on his research, he developed a trading system that brought him fabulous profits and helped him become the richest man in Japan in the shortest possible time. Having appreciated his merits, the emperor awarded him the title of samurai and appointed him as his personal financial advisor.
His method of trading and market analysis became widespread after he published a book in the 1760s, which laid the foundation for the Japanese candlestick method, which is successfully used not only in Japan, but throughout the world. In Europe, they learned about Japanese candles only at the end of the 19th century.
The founder of classical technical analysis in the West is considered to be Charles Dow, one of the founders of the popular ones, who at that time worked as the editor-in-chief of the Wall Street Jornal. In 1890, the magazine published a series of articles on the possible prediction of price behavior based on certain patterns. Dow described the principles on the basis of which it was possible to enter into a sale or purchase transaction with reduced risk.
It is noteworthy that the Dow theory became widely known only after his death.
The beginning of the heyday of technical analysis is considered to be the end of the 70s of the last century, with the advent of computer technology, when the analysis of charts and their construction became simpler.
If previously players using TA had to manually draw graphs and carry out calculations on a piece of paper, then the use of computer technology has simplified this work as much as possible. It was this simplicity of analysis that gave impetus to its development to the masses. As a result, almost any trader, having studied the basics of TA in just a few days, could be considered a technical specialist. analysis and put forward your hypotheses about further price behavior in the future.
Laws or postulates of technical analysis
Technical analysis is based on 3 main rules:
1. The market takes everything into account
The basis is the principle that all events (economic, political, psychological) are already taken into account in the price. It doesn’t matter for what reasons there is growth, the main thing is that these reasons push the price up and that means you need to take the side of the majority, and not go against the market.
2. History repeats itself
Based on ordinary psychology and mass behavior of people in certain situations. Knowing how people reacted in the past when a particular market model emerged, one can more likely assume that in the future in the same situation they will behave similarly.
3. Price movements are subject to trends
When the direction of price movement is in one direction, it is logical to go with it. When demand exceeds supply there is an upward trend (upward trend), otherwise there is a downward trend (downward trend). Based on this postulate, two consequences follow:
- A trend, at each point, is more likely to continue than to change its direction to the opposite.
- Trends are never endless and end sooner or later.
Therefore, one of the main tasks of TA is to determine the beginning and end of a trend.
What does technical analysis study?
At the heart of those The analysis contains several sections or tools, the study of which allows the trader to make assumptions about the future behavior of prices.
- Types of graphs or method of displaying them. The most widely used are 3 types: linear, bars and Japanese candles
- Basic concepts without which studying technical analysis makes no sense. This is the concept of trend, flat, support and resistance lines, channels, levels.
- Patterns or models are typical combinations that are formed on the price chart. There are trend continuation models and reversal trend models.
- Japanese candlesticks - based on a set of several candles, sometimes even just one, certain assumptions are formed about the further development of events.
- Technical indicators and oscillators. They are formed as derivatives of price, time and trading volumes (both in aggregate and separately) and displayed in the form of graphs, which are either superimposed on the price chart or used separately as additional information.
- Trading strategies using the above tools, allowing you to identify favorable situations for entering and exiting a transaction in order to increase profits.
- Risk management system. And although this point is not included in the study of technical analysis, it is the most important. Properly selected money management can bring almost any trading system to profit, and vice versa, a lack of understanding of risk management kills even the most effective trading strategy.
Example of TA on the stock exchange
Over the past few years, Gazprom shares have been traded in the channel. The upper limit is 148-150 rubles, the lower limit is 125-130 rubles, which act as strong support and resistance levels. Of course, sometimes prices tried to break through the channel, but came back.
By buying at the lower price level and selling at the upper price, a trader could easily make money on these predictable movements. The width of the channel is, even if we take the minimum, 18-20 rubles. This is approximately 12-14%. Over the past year, it was possible to make about 5-6 such transactions, which would bring profits in the amount of 60-80% profitability.
Why is TA so popular among traders?
There are a number of reasons for this:
- Quick learning. Unlike fundamental analysis, which requires a lot of time to study, mastering TA will only take a few days. The basics can generally be mastered in a few hours.
- Quick results. Trades made based on fundamentals tend to be very long-term. A position can be held for several months, years and sometimes even decades. Using only the technical aspects of analysis, you can achieve visible results in just a few days or even hours. There are even special trading strategies designed to carry out multiple transactions within one day.
- There is no need to thoroughly study the instrument being traded. It only takes a few minutes to analyze almost ANY chart to make an assumption about the further price movement.
- TA is applicable and works on absolutely any timeframe: monthly, daily, hourly and even minute (by the way, the smaller the timeframe, the more various “market noise” there is on it, so the effectiveness of analysis for short periods is reduced).
- Massive use of automated trading algorithms or simply trading robots, which in most cases trade using knowledge from technical analysis.
- Massive information almost everywhere about the possibility of beating the market many times over using technical analysis methods. Moreover, they are advised to make transactions as often as possible. What can I say to this? As they say: “Look for who benefits from it!” And it is beneficial for brokers and trading exchanges, who receive their small penny from each trader’s transaction. Therefore, the more transactions, the more profit. No “buy and hold” strategies. Only active trading. So the newcomers are led in, in the hope of getting rich quickly.
Why tech. analysis works
The effectiveness of technical analysis is explained quite simply. A huge number of traders around the world who use technical analysis in their trading see the same charts, models, figures, using the same indicators and oscillators. And as soon as a signal appears that the TA interprets as a buy signal, the majority begins to buy. As a result, the price starts to go up. If according to those analysis needs to sell, then many begin to sell, which pushes the price to the bottom. And the stronger the signal, the more players join the game.
There are several hundred (if not thousands) of different indicators in the world, on the basis of which one can make an assumption about the further movement of prices. And the more people use this or that indicator, the more effective it is. Therefore, over time, the number of traders spreads across these indicators, which ultimately reduces the effectiveness of everyone.
Therefore, the simplest (but powerful) models and only a few basic indicators that are used by most players in the market are considered the most effective. The explanation is also quite simple. Most traders only learn the basics. analysis, which is quite enough for them to trade.
Technical analysis is akin to statistics and public opinion polls. Its main purpose is to identify the mood of the crowd or the balance of power and take the side of the majority. When there is a buy position, when it is bearish - to sell. And as soon as the balance of power begins to change, exit the deal.
Maximum trading efficiency is achieved by combining two methods of analysis: technical and fundamental. With fundamental, stocks are selected that have a high growth potential and are currently, for one reason or another, undervalued by the market. Technically, you need to look for the right entry point into the transaction, using the maximum opportunity to buy these shares at an adequate price, at the moment they begin to grow.
For short-term trading on the stock market, behavioral information about stock quotes of a particular financial instrument always represents a certain value for the trader.
Often a trader trades with a small list of them and for quite objective reasons. Starting from the most banal - “it’s easier this way”, ensuring maximum concentration on instruments already well studied by him, to processes physically independent of him personally, for example, such as the presence of a liquid market or any individual non-standard characteristics inherent in the instrument being traded.
And here the question arises - “what does well-studied mean?” . What parameters are known to a trader that allow him to say that he understands a particular financial instrument relatively well?
In the process of working on the stock market, those who trade begin to notice certain features of the asset being traded over time. These include such indicators as volatility, volume, liquidity, price behavior at different hours of the trading session, characteristic percentage changes during the day, etc. and so on.
The parameters listed above are important components in the risk management system of trading activities of every professional trader. Knowledge and understanding of these things does not appear from just one glance at the chart of a particular exchange asset. Only through long practical hours of observing it (more than one day) or a deep analysis of the statistical characteristics of a financial instrument.
It was to speed up the process of getting to know the main behavioral features of a particular exchange asset that a desire arose to create a universal model for quantitative analysis of financial instrument quotes.
The indicators used in the program are basic, and the formulas for their construction are absolutely open.
Thus, if you wish, you can supplement the program with your own indicators and diagrams.
This application will become your integral auxiliary tool in the risk management system when trading on the stock market!
Details can be found here:
Happy investing everyone!
Sincerely,
Alexei
Trade. The ability to predict price movements better than other market players can make a trader a wealthy person. In order for forecasting to be as reliable as possible and forecasts to be justified, traders use stock exchange analysis. There are three main methods of stock analysis:
Methods of stock analysis differ primarily in the tools used for forecasting. Let's look at each type of analysis.
In the most simplified understanding, fundamental analysis comes down to an attempt to answer the question: how good is the economy of the analyzed country? predicts the movement of the national currency, guided by a simple relationship:
Therefore, the main task of a trader using fundamental analysis is to form an informed opinion about the economy of the country whose currency he is going to trade (if it comes to). Fundamental analysis of the stock market involves studying the financial statements of the company whose shares the trader intends to trade, and studying the dynamics of its development.
The main macroeconomic data that a trader must analyze as part of fundamental analysis are:
- Central Bank interest rate.
- Dynamics of growth of the country's money supply.
- Level of confidence in the currency on the world market.
The source of data can be anything: newspapers, forums, professional analytics on broker websites, television programs. The disadvantage of all the sources listed above is that the trader has to combine and summarize the data, which is a rather labor-intensive process. Therefore, most traders who prefer fundamental analysis use economic calendars, where it is already given in order and can be filtered if necessary.
This is what the economic calendar looks like:
The trader is immediately offered information about the importance of a macroeconomic event, the previous value of an economic indicator, and analysts’ forecasts.
If you click on the indicator itself (for example, on the New Zealand food price index), you can see the dynamics of the indicator over recent periods:
Please note that the calendar offers to show even more data - if necessary, you can look at the history for the last ten years.
There are several methods of fundamental analysis:
- 1. Method comparisons. Great for Forex trading. The trader, knowing which macroeconomic indicators are universal, compares their values for two countries whose currencies form a pair. The universal indicators are GDP and interest rate. A comparison of indicators makes it possible to predict the price movement of a currency pair, precious metals and raw materials.
- 2. Seasonality. The trader relies on the seasonal factor. For example, the prices of shares of agricultural companies and energy resources depend on seasonality. The prices of these assets in turn affect the value of the national currency.
- 3. Deduction. The deduction method is based on the synthesis of macroeconomic data - the trader collects as much information as possible about the economy of a particular country and, based on it, draws a conclusion about its general condition.
Technical stock analysis
- By patterns. Patterns are repeating geometric figures that can be used to predict market behavior with high probability. A large number of patterns can be found here -. A classic example of a pattern is “head and shoulders”:
It is clear that the highest peak of the graph is the “head”, and the peaks on both sides are the “shoulders” (it is important that the shoulders are at approximately the same height).
You need to open a short position when the right shoulder crosses the so-called line neck, that is, the lower of the inclined lines of the channel. Take profit should be set using height from the peak of the head to the neck line:
The take profit setting level on the chart is marked with a green line.
Technical analysis is valued by short-term traders more than fundamental analysis, as it eliminates the need to summarize macroeconomic indicators and wait for reports to be published.
Exchange volume analysis
Trade volume analysis is gaining popularity. Proponents of this method justify their choice by the fact that the fundamental and technical methods consider the consequences, while volume analysis considers the reasons for price formation.
Volume– this is the number of contracts that were sold or purchased over a certain period. The volume graph is presented in the form of a histogram:
Volume analysis is to identify at which price levels the greatest interest was observed. When examining volumes, it becomes noticeable that the price of an asset moves from one large volume to the next.
There are two types of exchange analysis of market volume: horizontal and vertical.
- At vertical analysis the number of operations performed during one timeframe period is displayed in the form of histogram bars. The vertical analysis indicator has the usual form:
- Horizontal analysis accumulates data not for a period, but for a certain price level.
It can be seen that horizontal analysis shows the ratio of purchased and sold contracts. Another popular volume indicator works in approximately the same way - indicator market sentiments.
This indicator does not provide information on the absolute number of transactions concluded over a period of time or at the price level, but it allows you to analyze the psychological mood of market participants. The total number of transactions concluded during the period is taken as 100%, after which transactions are divided into “bearish” and “bullish” and are presented to the trader in the form of a ratio.
Stay up to date with all the important events of United Traders - subscribe to our
What is technical analysis? Something without which it is impossible to predict price movements. For several hundred years now, it is thanks to him that millions of traders pretend to be smart and try to understand where the price will go.
How else? If you're a rice trader on an ancient stock exchange, you need a way to predict when you can profit and when you should avoid the market. And it doesn’t matter that it’s the 18th century, the toilet is on the street, and there are still 200 years before the invention of the telephone.
The first obstacle – the word “technical” – often scares away. The name is very unfortunate. Because when you dig under the hood of a car, isn’t this less of a “technical analysis” of a certain mechanism? He is the one.
But with technical analysis in binary options, forex or the stock market, everything is different. Here the analyst works with the price movement according to the chart and learns to find all the necessary patterns of this process.
In the West they are also called chartists, from the word “chart” - graph. In general, replace the word “technical” with “graphical” and it will be less scary.
Technical analysis is when you poke a pen into the screen (just kidding).
Why does technical analysis work at all? How can lines on a chart determine price movement? All that is on the chart is just the balance of supply and demand. When demand greatly exceeds supply, or vice versa, trend.
In other words, in technical analysis we do nothing more than study the life of the market, its emotional state, optimism and pessimism of traders.
So technical can be safely replaced with “behavioural”, “graphic” or even “emotional”. And whoever came up with the idea of using “technical stuff” to scare newcomers should be spanked.
History of technical analysis
This is a much older thing than you might imagine. For example, some provisions of technical analysis were developed by Joseph de la Vega in the 17th century for trading in the Dutch markets.
In the 18th century, Homma Munehisa, a Japanese rice merchant, developed what would become modern Japanese candles. Just imagine - these candles have been working for over 200 years.
In the 1920s, Richard Schabacker published several books on technical analysis, which developed the work of Charles Dow and Peter Hamilton in their books “Stock Market Theory” and “Technical Analysis of Markets.”
Finally, in 1948, Robert Edwards and John Magee published the legendary book “Technical Analysis of Stock Trends,” which is still being republished by Amacom and has taken pride of place in my electronic library.
Early technical analysis was based exclusively on graphical methods, since computers and statistics were, to put it mildly, strained. And Charles Dow – he actually started with point-tac-toe charts.
At the end of the 19th century, Charles Dow developed what was then called "" and which became the basis for modern technical analysis. The Dow Theory still works today, just as it did on day one. , William Gunn, Richard Wyckoff - all these guys at the beginning of the 20th century created something that is still used today. Over the past decades, many new technical tools and theories have emerged as computer technology has made incredible leaps forward.
Industry
The main industry organization is the International Federation of Technical Analysts (IFTA), of which, by the way, he was chairman for several years. In the USA there is the Association of Technical Analysts (Market Technicians Association, MTA) and the American Association of Professional Technical Analysts, AAPTA.
There are similar organizations in the UK, Canada, Australia, etc. The MTA also offers a 3-level Chartered Market Technician (CMT) exam.
Basics of Technical Analysis
Technical analysis is very multifaceted. These are charts and models, technical indicators and oscillators, a combination of various techniques and methods. This is volume data. But in all its diversity, there are only three key postulates:
- all factors influencing the price are already included in the schedule;
- the price always moves in trends;
- history repeats itself.
Let's go over them.
Everything is included in the price
The price and its movement, which we see on the chart, already contain all the factors that influenced it.
That is why it is possible to predict the price movement of FB (Facebook shares) without having the slightest idea about the economic state of the company, its balance sheet, what its financial indicators are.
In fact, the price includes the ratio of supply and demand for a certain asset, be it a stock or a currency pair - and this, it would seem, is enough for a technical analyst.
However, we must strive for universality. It is important to combine methods. It is not necessary to delve into the depths of fundamental analysis, but you need to know what important news is coming out today.
This is what different ones are used for. One of them is located under my . News with “three heads” usually gives the market an impulse that is very difficult to predict with “naked” technical analysis.
The price is trending
Second important aspect. The price, one way or another, always moves in a certain, obvious direction - a trend. It is on trends that money is made. That is why all these proverbs in books like “trend is your friend”, etc.
The vast majority of strategies are based on trends. Moreover, each trend consists of small microtrends. But we'll talk about this in more detail a little later.
History repeats itself
What happened before will happen again. This is why candlestick patterns and reversal patterns work. Price has a cyclical nature because market participants have a similar psychology and repeat their actions over and over again.
This is why many models that were developed in ancient times work. Let’s say this trend reversal pattern “ W” is more than 100 years old – and the screenshot was taken a few days ago. This is such a time machine.
Assets
Technical analysis works for any asset (example):
- currency pairs (EUR/USD);
- shares (AAPL);
- indices (S&P 500);
- futures (CL);
- raw materials (UKOIL).
Technical or fundamental analysis
There are 2 schools of market analysis - technical and fundamental. Although there are some oddities like, mom help, “ ” (trading according to the phases of the moon; no, no, I’m not even joking). Adherents of these methods like to argue, but, in reality, for a successful forecast you need to be friends with both.
In technical analysis, only price movement matters. How it moves, with what speed and amplitude, what is the impulse of its growth or fall, what candles are formed and so on.
Fundamentalists love economic factors. In the case of shares, this is the company’s balance sheet, the balance of working capital (the movement of money into and out of the company, also known as cash flow), profit and loss statements, and the like.
In fundamental analysis, they prefer large time frames, sometimes even for a year. In technical analysis, you can successfully work even on a 5-minute chart.
For us, in binary options, technical analysis with the addition of fundamentals is just what the doctor ordered. We work according to the canons of technical analysis, look at important news and this will be quite enough.
Trends
The basis of technical analysis is trend. This is a price movement in a certain direction.
Uptrend:
Downtrend:
Between trends, the price likes to rest in a sideways movement when there is no trend as such:
Wave-like trends
Unfortunately, if trends were straight as an arrow, your cat could make money too. However, trends rarely follow a straight line. Typically it is a combination of highs and lows that make up a trend.
For example, an upward trend can often be decomposed into the following micro-waves:
At the same time, in reality the waves, of course, are not as beautiful as in the diagram, and in a smooth, beautiful trend the price rarely moves (although sometimes it does happen).
Trend duration
All trends can be divided into:
- short-term;
- mid-term;
- long-term.
To determine the duration of a trend, you need to use higher timeframes. In classical theory, trends are divided into annual, monthly and daily. But this is relevant, in general, for stock trading.
In binary options, as a rule, we only need:
- determine the long-term trend on a 1-day chart;
- medium-term ones will be at 1-4 hours;
- short-term at 5 and 15 minutes.
Thus, we see an oil painting when one long-term trend consists of several medium- and short-term ones.
This is often a mistake newbies make. They set one frame, like 5 minutes, identify trends, but forget to identify medium- and long-term trends. And then they wonder why the price suddenly reversed within 5 minutes. Yes, because on another frame the picture looks different.
Let's say what do you see in these 5 minutes? Is the price abnormally falling down after a sideways movement? Undoubtedly.
However, let's look at the same pair at 4 o'clock.
It turns out that our “sustained downtrend” at 5 minutes is just one red candle. And the medium- and long-term trend has been going up for several weeks. Therefore, our 5-minute “trend” is temporary and short-lived.
Trend lines
This is a simple and effective technique for identifying trends. It is enough to draw a line along the maximum candles to determine the further price behavior. Trend lines help determine not only the trend, but also its reversal.
For a downward trend, the line is drawn at the top:
For an upward trend, accordingly, the line is drawn below:
Price behavior immediately becomes more orderly. It will either rebound from the next contact with the line, or it will break through it, after which the trend can be considered complete.
Channels
The channel is a development of the trend line idea, which is very popular. Prices often follow these channels and give us a lot of trading opportunities.
The channel can go up, down or horizontal flat(most delicious). Trading in the channel continues until the price breaks through it.
There are a lot of advantages - the direction of the trend is immediately visible, the channel walls act as points of “rebound” for the price, in general, everyone is happy.
Pay attention to the shadows of the candles - they tell you where in the channel it is best to enter.
You can and should use the channel according to the trend.
Two main thoughts about trends that you will find in books:
- trend is your friend;
- don't work against the trend.
Support and resistance
After the trend and channels, the next important question is the lines (levels) of support and resistance, abbreviated as “p/s”. These are conditional lines from which the price previously “bounced”.
- Resistance is the line that is drawn at the top. She “resists” and does not allow the price to rise.
- Support, on the contrary, does not allow the price to fall lower and “supports” it.
Why? This is a matter of psychology, as well as the balance of supply and demand. There are no people willing to buy at such a high price? This means that the price does not rise above a certain level. For the time being, for the time being. Until a buyer comes who has seen enough positive news and begins to buy and buy again. Result? The price is going up.
If the price confidently “breaks” the line, it means the market psychology has changed, this is a breakout. And soon the market will find new support and new resistance.
The magic of round numbers
The psychology behind these lines can also be judged by how often these lines form on round numbers such as 10, 20, 35, 50 and especially 100. These psychological levels force traders to buy and sell again and again.
Let's say the stock price is $120, it falls and approaches $100. Many traders begin to buy, despite the fall, being confident that the price will not be able to break through such an important psychological barrier with the number 100. This often happens.
As a result, the price reaches a flat number and “bounces” from it, being unable to cope with it. The support line works in such a way that it seems to “support” the price from below.
The opposite picture is also true, when the price rises, reaches 100 and bounces down. The resistance line has worked in such a way that it “resists” and does not allow the price to move further.
Role reversal
Sooner or later, the support or resistance level will be broken. Price will inevitably have enough strength for this. Then their roles change. What was resistance will become support and vice versa.
Any price always has its own level of support and resistance. Sometimes a so-called “false breakout” occurs when the price tried to break through the p/s, but failed.
Many traders trade only along support and resistance lines. This is the most important concept in technical analysis, perhaps even the most important. The more often the price bounces from a certain price level, the more reliable it is, especially on higher frames.
However, a breakout of the line will happen sooner or later - so don’t expect the price to always bounce off the lines like a ball.
In addition, important news gives the market such an impulse that it breaks even the most reliable p/s. Therefore, you must stay up to date with major economic news. Even in order not to trade at the time of the announcement of, say, economic indicators (those “3-headed” news).
Channel of support and resistance
It would be a mistake to always wait for an exact rebound. Usually the price hangs around the support and resistance lines in a small channel. That is why, instead of lines, they often draw a channel that covers the shadows of the candles that “felt” the line, but were unable to break through it.
Focusing on such a channel, it is easier to understand where it is better to enter on a rebound in binary options and with what expiration.
Volumes
Price movement is displayed by various types of charts, the main ones of which are only 3:
- candle;
- linear;
- bars.
Candlestick chart
The candlestick chart was invented by the gloomy Japanese man from the picture at the beginning of this article. A candlestick is a very effective indicator that shows the selected period of time over which the price moved.
The structure of a candle looks like this:
Candlestick analysis
Since a candle is an indicator, it means it must show something more than just price movement over a timeframe. This is true. That is why there is such a discipline as candlestick analysis.
It has been studying the types of candlesticks and their combinations for decades, which allows us to judge changes in the nature of price movement.
Both candles of a certain shape and their combinations are used.
Candlestick combination “bearish engulfing”:
There are hundreds of candlestick combinations. There is no need to cram them. In practice, when contemplating a chart, you need to select several combinations that attracted your attention and learn to find them in different conditions and on any time frames.
The classic of candlestick analysis, the book “” by Steve Nison can be downloaded from the forum.
Price action
There are a colossal number of candlestick combinations. There are several hundred of them in Neeson's books alone. However, here's the thing. All these books, being classics of technical analysis, were sometimes written several decades ago.
But the markets have changed a lot since then. Now 70% of trades that we see on the charts are carried out by high-frequency robots. Millions of traders trade from home, without leaving their chairs.
That is why price action is becoming more and more relevant. This is cutting-edge candlestick analysis for the fast markets of the 21st century.
Well-known Western traders, such as , and many others, have developed their own price action systems, which should be studied only after you have learned the basics of technical/fundamental analysis.
An example of price action translation from Neil Fuller with his comments:
Line graph
Linear is the simplest chart, just a line, which allows you to quickly determine the direction of price movement. The line is formed by combining closing prices for the selected timeframe.
As a result, on a linear one you cannot see the highest price for the selected time period (timeframe) or the opening price. However, the closing price is considered a more important indicator.
A line chart is only suitable for quickly determining a trend.
Bars
Western traders love bars, and many strategies are focused specifically on their use. The principle is the same as candles, but the visualization method is different. We see the opening and closing prices, the maximum and minimum prices for the selected timeframe.
In general, it doesn’t matter what you use – the main thing is that it helps in your forecasts.
The most popular is, naturally, the candlestick chart. As for exotic charts, such as Renko, Kagi or tic-tac-toe, they are very rare and are used by experienced stock traders.
Technical analysis figures
History repeats itself - this is how we started this article, remember? It is on this concept that the theme of price figures is built. These figures are repeated constantly, and many of them signal the same thing.
Of course, there is no figure that will always, 100% indicate the correct price movement. However, they are extremely useful in analysis. If you find them patiently, they will show excellent results.
All figures are divided into:
- trend figures;
- reversal figures.
There are many figures and we will consider only the important ones.
Remember, this is important. Reversal patterns work mainly from the 15-minute time frame and after a fairly strong trend.
In the sideways low-volatility movement of the figure, it is almost useless.
Head and shoulders
This is the most popular figure in technical analysis. It is very old, it is described in thousands of textbooks. First of all, you should learn to find it.
The figure consists of a head – the maximum price value – and two “shoulders”, also known as intermediate peaks. Scheme:
In reality, the price will not be as beautiful as in the diagram, so it is enough to simply focus on the peak values to determine the shoulders and head.
Shoulders can be different sizes, that's okay. The main thing is that the head should be higher than the shoulders.
For the figure you need to draw the so-called “neck line”. As soon as the price goes beyond this line, a trend reversal begins.
By the way, on the live chart for drawing the head and shoulders there is a special Head & Shoulders tool (like the famous shampoo). This is exactly how they were depicted in the examples:
Head and shoulders is a basic reversal pattern that has been around for many years. You definitely need to know it.
Figure “Cup”
A coffee cup with a handle is quite common. Super precision in drawing it is not required, we are not artists here. The main thing is to catch the shape of the price movement by drawing a line according to the rules of trend lines.
Double top: regular and inverted
A very popular figure indicating a trend reversal. Like “head and shoulders”, it is considered one of the most reliable.
It is formed when the price tries to break through the support or resistance line twice, after which optimism runs out and the price reverses.
Inverted double top
Triangle
It is also one of the main figures of technical analysis, which has been bringing money to traders for over 100 years. Triangles come in three types:
- symmetrical;
- ascending;
- descending.
In fact, the triangle consists of trend lines. In a symmetrical triangle, both trend lines converge equally at one point.
In the other two cases, one of the lines will be horizontal and act as a support or resistance line.
Symmetrical triangle
Descending triangle
Breakout up, along the trend:
Ascending Triangle
The upper side of the triangle acts as resistance:
Figure “Flag”
Fairly common figures. The flag consists of an inclined channel with a “handle”:
Figure “Pennant”
A pennant can be imagined as a triangle with a “handle”. Breakout of the pennant along the trend:
Figure “Wedge”
As you know, we knock out a wedge with a wedge. The figure resembles a symmetrical elongated triangle, directed in a certain direction up or down. A wedge can either confirm a trend or refute it.
As a rule, if the price goes beyond its upper line, then we are talking about confirmation of the trend, if it goes beyond the lower line, it means a trend reversal. Do not forget, of course, to evaluate the situation on higher frames.
Triple top or bottom
Another example of a reversal pattern. There are no obvious heads and shoulders here, but there are clear three lower zones where the price bounced off the support line.
As a rule, after such a triple rebound, you should expect a trend reversal.
Saucer figure
It resembles a cup, just without a handle or the handle will be of a different shape. Typically, such figures indicate a long-term price reversal and perform well on higher timeframes - from 1 hour.
We've looked at some of the most popular figures. There are much more of them - but the article is not rubber.
Gap
A gap is an empty space between candles. It appears between trading periods, including between Friday and Monday. Another option is due to an excessive difference in price between two trading periods (relevant for stocks). Gaps also appear when there is a very strong “jump” in the price.
There are three types of gaps:
- to rupture (accompanied by increased volumes);
- to break away (in a very strong trend);
- at the end (shortly before the price reversal).
Gap trading is another subsection of technical analysis, so I will describe it in more detail in a separate article (this one is already horse-sized).
In any case, gaps are needed, first of all, for the Forex and stock markets; they are rarely used in binary options.
Moving averages
Price rarely moves evenly. Usually this is a wave-like, and sometimes even chaotic movement, in which it is sometimes difficult to find a trend. To deal with this problem, moving averages are used.
This, in fact, is simply the average price level for a certain period of time, such as the “average temperature in the hospital.” Thanks to the sliding ones, chaos turns into smoothed, orderly movement, and the trend is there, right in the palm of your hand.
Types of moving averages
There are several types of moving averages, the main ones are:
- MA (Moving Average) – moving average;
- SMA (Simple Moving Average) – simple moving average;
- WMA (Weighted Moving Average) – weighted moving average;
- EMA (Exponential Moving Average) – exponential moving average.
However, you don't have to stress. The differences between them are not so pronounced. Here are three moving ones from the live chart. As we can see, the sky did not fall to earth:
In fact, some moving averages are simply a little faster than others, say the EMA is faster than the SMA, simply less smoothed. So, on short expirations, you can choose faster moving averages, and on long ones, slow ones.
For the more sophisticated, TradingView has an indicator CM_Ultimate_MA_MTF_V2, which uses 8 moving averages at once:
- SMA (Simple Moving Average).
- EMA (Exponential Moving Average).
- WMA (Weighted Moving Average).
- HullMA (Hull Moving Average).
- VWMA (Volume Weighted Moving Average).
- RMA (Moving Average in RSI).
- TEMA (Triple Exponential Moving Average).
- Tilson T3 (Tilson T3 Moving Average).
But it’s better not to get too carried away by sorting through their varieties.
Using Moving Averages
Moving averages are used to identify three key situations:
- trend;
- trend reversal;
- support and resistance levels.
It is the moving average that allows you to quickly understand what is happening with an asset, whether it is growing or falling. Let's say we set MA 42 and the 4-hour chart takes on completely different shapes.
In this case, the moving average MA 42 worked as a reliable resistance line for EUR/USD for several months. Well, when the candles cross the line, the trend is complete.
Another method of determining the trend is paired moving averages, one short-term and the other long-term. For example, if MA 5 is located above MA 25, the trend is going up. And vice versa:
Moving price reversals are determined in two ways:
- when candles/bars pass through the moving average;
- when the moving averages intersect.
Let's say, after the candles crossed the MA 50 on the 1-hour time frame, it began to fall:
And of course, the most popular application, which you should already know about, is the intersection of moving averages. It is used in a wide variety of strategies.
For example, the intersection of MA 15 and 50, plus the already familiar marubozu reversals.
At the same time, the intersection of moving averages with fairly small values, such as 15 and 35, may indicate a short trend reversal. But when powerful MAs like 50 and 200 intersect, things start to get serious.
Of course, in a flat – when volatility is low – there is no need to focus on intersections.
What moving averages should I use?
There are a huge number of strategies with them. Some of them are already described on the site:
Often they are selected by hand. Change the values until the moving average becomes support or resistance, or shows the picture you want. You can also take a universal “long-playing” option, like MA 100 or 200.
Moving averages are a very popular technical tool that can be found on any professional chart. Therefore, its use is, in fact, mandatory.
Indicators
As you can see, I describe the indicators at the very end. Why? Because this is where they belong. Beginners do the opposite: instead of studying support/resistance lines and the basics of technical analysis, they wildly throw a bunch of indicators onto the chart and get this “beauty”:
Indicators are actually a useful auxiliary tool, nothing more. They help you see price movement and volatility from a variety of angles. Any indicator has two tasks:
- confirm the trend;
- confirm the reversal pattern/pattern.
All indicators presented on a live chart or in any terminal are lagging. This means that the indicator does not predict anything, always follows the price and simply displays the past.
Some of the most popular indicators are oscillators.
Oscillatory indicators
These are one of the most popular types of indicators. They are displayed on a conventional scale, usually from 0 to 100.
- the closer the value is to 100, the more the asset is overbought (a fall is expected);
- the closer to 0 – oversold (a rise is expected).
Intersections and divergences
These are another signals that indicators often give. We have previously talked about moving average crossovers. The same is true for other indicators, like ADX.
ADX crossover confirms trend reversal:
Divergence is another popular condition for many oscillators, when the direction of the indicator and the price diverge, indicating an imminent trend change.
Indicators provide a lot of useful information. They help calculate the strength of price movement, trend direction, volatility and many other indicators.
As a rule, professional traders use, at most, 1-2 indicators, but honed to perfection.
It’s easy to trade based on the indicator, however, it is forbidden, since this is just a mathematical abstraction carried out with living matter - price. Therefore, any indicators are used in conjunction with technical analysis, candlestick patterns, and sometimes with other indicators.
Popular indicators
Let's look at several popular indicators that are often used by professionals in technical analysis.
Accumulation/Distribution (A/D)
One of the most popular volume indicators, which compares price movement with trading volume for the same period.
This joy is only available for stocks and indices, so do not try to use it with currency pairs. Alas, there is no reliable data on volumes for currencies, what you want is an unregulated interbank market.
But for stocks, A/D is often used and is found in a wide variety of strategies.
A/D is used to identify trends. If the A/D line is trending upward, this is an indication that the buying power is becoming greater. At the very peak of A/D, we should expect a price reversal after a period of consolidation.
Average Directional Index (ADX)
An indicator for determining the strength of a trend. It does not indicate its direction, but how strong the current trend is.
On a live chart, ADX is called Directional Movement. It consists of several lines:
- positive direction indicator +DI;
- negative direction indicator –DI.
A plus sign shows the strength of an uptrend, a minus sign – a downtrend. The data is displayed next to the ADX line on a scale between 0 and 100.
You can understand the essence, naturally, by looking at the trend. That's how it is here. Steady downward trend, -DI after crossing above 40, +DI below 20, the ADX line tends to rise, indicating that the downward trend is strengthening.
Aroon
This is a relatively new indicator, created in 1995 (most were developed back in the 70s). The indicator is a trend indicator, its task is to show the presence of an outgoing or upward trend, as well as its strength.
Aroon is also used to identify a new trend. The indicator consists of two lines, red and blue.
The blue line displays the period of time that has passed since the price reached its maximum value during the specified period of time. Red, accordingly, is the opposite. In this case, the time period changes depending on the selected timeframe.
A classic example of using Aroon is a trend reversal. After a long period when blue was at the top and red was at the bottom, they cross and the trend begins to change. For example:
MACD
One of the most famous indicators in technical analysis, which I described in detail here:
Using the power of moving averages, MACD is usually used at intersections:
RSI
Also a very popular trend strength indicator, described here:
Used when overbought and oversold:
On Balance Volume (OBV)
Another well-known technical indicator for stocks and indices, it can be considered a trend indicator. Very simple and clear.
It works simply, the total volume for the trading period is taken and a positive or negative value is assigned depending on the price movement during this period.
When the price is up, the volume is assigned a positive value; when the price is down, a negative value is assigned. The total positive or negative value is then added to the total from the start of the measurement.
The main thing in OBV is not its value, but the trend of its line itself. If it shows steady growth, the same should be expected from the price. If the indicator line is sadly boring without a clear direction, the same thing happens with the price.
Stochastic
This is probably the most popular oscillator in the world. And it just so happens that he is very close and understandable to me, which is why he is often visible on my screenshots. Described here:
In general, this is an indicator of momentum - the strength of price movement. In a strong trend, the price approaches its trading “ceiling”, which hints at a subsequent reversal.
Therefore, the main thing they look at in stochastics is the overbought and oversold zones. This is my favorite indicator that complements the foundation of technical analysis.
He is also quite good at divergence, for example:
Technical analysis: summary
Pink ponies poop butterflies. Joke. This was a check to see if you had read the article to the end (probably just skipped it). Let's briefly summarize what technical analysis is.
- All factors are included in the price, it moves with trends, and history repeats itself.
- The price has everything you need to know.
- Technical analysis must be combined with fundamental analysis.
- The price moves in trends: upward and downward, or is in sideways movement (consolidation).
- The trend line is the simplest technical analysis tool.
- A channel is two trend lines that act as support and resistance.
- Support keeps the price from falling, resistance keeps the price from rising.
- Volume is the number of shares or contracts traded. The greater the volume, the stronger the trend.
- There is no normal volume in Forex (currency pairs).
- There are three main types of charts: candlestick, line and bars.
- For binary options, timeframes of up to 1 day are used, for Forex and stocks – up to a year.
- Technical analysis figures help you find price reversals.
- Head and shoulders are the main price reversal pattern.
- Cup, double/triple top, triangles, flags and pennants are examples of other patterns.
- A gap is a gap between trading periods or during a sharp price movement.
- The moving average helps identify trends and smooth out market noise.
- The indicators are based on a formula that takes into account price movement and volume.
- Popular indicators are A/D, Aroon, ADX, MACD, OBV, Stochastic, RSI.
As you can see, technical analysis is a very voluminous topic. It has been studied for months and years. But this should not be a theoretical discipline for you. Yes, in scientific circles technical analysis is tormented scientifically, and in magazines like Stock and Commodities you will see such examples of technical analysis that you will not sleep after them, but for you and me it is the most real, most practical thing in the world.
Little secret
The main thing I want to advise you is to avoid the mistake of a beginner who throws 10 indicators on the chart and tries to predict something like that. The market is a living mechanism; it is nothing more than the reaction of its participants. On the graphs we see the market balance of supply and demand. Indicators are ordinary mathematical formulas, very simple. They cannot predict the global market. Therefore, to achieve success, you need to competently use the entire arsenal of tools: from news, candles, trend lines and p/s to reversal figures, price action and certain indicators.
And a little secret from the future. You will go through a long, difficult path. You will try dozens of indicators and candlestick combinations until it dawns on you that they are all, in essence, equivalent. And it’s not they who are important – but you yourself and your trading psychology. This is why two traders can put the same moving average on the same chart, and then one will give the correct forecast, but the second will not.
After some time, when your head is bursting with knowledge, you will inevitably do the main thing - throw everything out of your head and begin to perceive the chart with fresh eyes. And then a small miracle will happen - you will see the good old tools with completely new eyes. Trend lines, reversal patterns, moving averages, and candlestick patterns will suddenly appear before you in a completely different light. Months of experience and thousands of deals will turn them into something amazing that you never saw when you started.
Trading is magic. In all aspects. The ability to work anywhere in the world with a laptop on your lap, the ability to earn more in an hour than you earned in a month while sitting on your last job. So become a wizard - and wave your magic wand of technical analysis so that this limitless reservoir of financial opportunities will share with you a drop of life-giving moisture. In this artistic finale, I walk off into the sunset *upbeat music plays*.
Send your good work in the knowledge base is simple. Use the form below
Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.
Posted on http://www.allbest.ru/
Introduction
1. The concept of exchange price
2. Analysis of exchange prices
2.1 Approaches to the analysis of exchange prices
2.2 Fundamental analysis and technical analysis
3. Reasons for price fluctuations on the stock exchange in the Russian Federation
3.1 Setting prices for certain types of securities
3.2 Stock market prices and reasons for their fluctuations
3.3 Practical analysis of the relationships between stock exchanges: MICEX and RTS
Conclusion
Introduction
Questions about what an exchange is and what features are included in the concept of it are, first of all, of course, important for legislation. There is a special need for legal definition and differentiation of various trade meetings, because the economic importance and efficiency of exchanges is simply obvious (it is enough to refer to the turnover of exchanges and compare them with the main macroeconomic indicators of the state economy (for example, GDP)). It is also obvious that the exchange is a business entity and conducts business activities (exchange), acting as an intermediary between buyers and sellers. In this regard, the exchange has certain, but quite specific, rights and responsibilities. The specificity of rights and obligations is explained by the same economic isolation and importance, and, consequently, state supervision.
Ever since people began trading different commodities—grains, metals, or stocks, for example—traders have noted patterns in the behavior of prices over time, such as trends and patterns. Over time, sayings like this were born: “The Trend Is Your Friend” (“The Trend is your friend”). What do they mean, how accurate are they, why do people even study stock price charts?
Market participants try to obtain maximum income from their investments and profit from their transactions. They study various techniques that would help reduce the risks of losing money and increase the chances of success in trading. Is it possible to determine the moment when it is profitable to buy and when it is profitable to sell securities? Trading participants study charts and analytical tools to determine changes in the supply and demand for securities. This helps to predict possible price movements and formulate strategies for all financial markets.
1. The concept of stock price
Depending on the type of market in which prices are formed, they are divided into commodity auction prices, exchange trading prices and auction prices.
Commodity auction prices. An auction is an auction organized in a special place at a designated time for the sale of certain goods, i.e. it has a narrow specialization, the number of sellers at auction is limited, and there are many buyers. The auction price is the public sale price at the maximum level offered by the buyer. A consignment of goods (lot) offered for sale is preliminarily inspected by buyers, and in the process of public bidding, as a result of competitive competition between buyers, the level of the auction price is determined. Auction prices are used in the trade of fur and fur products, tea, precious metals, forestry products, agriculture, and fishing. Objects of art and antiques are also sold through auctions. Thus, the main difference between the auction price is the formation of its level in the process of strong competition; as a result, the auction price can be higher than the market price and often it is many times higher than the originally assigned one, since it reflects the unique and rare properties and characteristics of the product, and also depends on auctioneer skill.
Exchange prices are formed during trading on exchanges. An exchange is a specially organized and permanently operating market on which, in accordance with established rules, transactions for the purchase and sale of mass, qualitatively homogeneous, interchangeable goods and products are carried out. More than 50 types of goods are sold on the world market through exchanges, and the share of exchange trade is 15-20% of international trade volumes. Depending on the objects of exchange trading, there are commodity, commodity-stock, stock and currency exchanges, and each of them can be specialized or universal. According to the scale of activity, exchanges are regional, national and international.
In Russia, price formation on the stock exchange is carried out in accordance with the Law of the Russian Federation “On the Commodity Exchange and Exchange Trading”, according to which stock trading is carried out in the manner of open public trading with guaranteed free pricing. The main factor determining the level of exchange prices is market conditions, and prices on exchanges react very sensitively to its changes. The following prices are used in stock trading.
Rice. 1. Types of exchange trading prices
The price for real goods available in the warehouses of the exchange is of two types, depending on the delivery conditions:
"spot"- this is the price of a cash product with immediate delivery;
"forward"- the price of a product with delivery in the future, it is paid within a certain time when the product is transferred to the buyer from the stock exchange warehouse. The forward price takes into account not only supply and demand, but also storage costs, insurance, interest on loans, etc.
The purpose of transactions for fictitious goods (not in the stock exchange warehouse) is to insure buyers against possible losses as a result of changes in market prices not in their favor.
Futures transactions are the mutual transfer of rights and obligations for the supply of an exchange commodity under a standard contract. Options transactions are a continuation of futures transactions and provide the right to buy and sell futures or cash contracts at a given price for a specified period in the future.
The prices at which transactions are made on the exchange are, as a rule, strictly fixed and do not change during the term of the contract.
Based on information about prices for transactions concluded on the exchange, stock quote prices produced by the quotation commission according to the established methodology.
Price quotation can be done in different ways:
Registration of actual prices of exchange transactions;
Determination of the maximum fluctuation of the price range (minimum and maximum) during the exchange day;
Determination of price fluctuations of the first and last trade of the day. It is important to indicate the price of the last transaction, since it is believed that it most accurately reflects the relationship between supply and demand;
Designation of the prices of the first and last transaction, indicating intermediate changes in price dynamics during the day (decrease or increase);
A combined combination with the prices of the beginning and end of exchange trading;
Deriving a typical reference transaction price (RTP), the value of which is determined by the arithmetic average method using the formula:
Where C 1, Ts 2... Tsn- the price of the actual transaction, rub.;
K 1, K 2... Kn- number of units of goods (products) under the transaction, units.
Exchange quoted prices are for reference purposes and serve as a guide for sellers and buyers. At the same time, the exchange price quotation is the most important characteristic of the state of the market conditions for a given product, since it records the ratio of supply and demand, the number of transactions completed and goods sold, and the dynamics of prices for goods during the day.
Bidding prices- these are prices that serve a specific form of trade based on competition between buyers. The essence of the auction is that the organizer (seller, contractor) announces a competition for the issuance of an order for the supply of goods (contract to perform a certain type of work) according to the conditions previously announced in a special document (tender). A distinctive feature of auctions is the presence of several buyers, contractors (offerors) and one seller (customer). Competitors provide the organizer with their proposals, from which he chooses the option that is beneficial to him. As a rule, when receiving a tender, they stipulate not only the price level, but also the fulfillment of certain conditions. The tender system in Russian practice was used in the privatization process, when announcing a competition for the development of mineral deposits, and during the construction of large facilities, but in general it is poorly developed. In international trade, tenders are held for technically complex and capital-intensive engineering products, construction work, and currently cover 1/3 of all export prices for machinery and equipment.
Bidding can be open (public), in which everyone can participate, and closed, available to a limited number of bidders.
During the bidding process, prices are distinguished:
offer prices- these are the prices of the offerors, they are not negotiated, and the commission only selects the most optimal level. The offer price depends on the specifics of the product, as well as on which country the offeror is from - developing or developed capitalist. The prices offered by participants from developing countries are lower than the prices of Western countries, which have a higher level of technical equipment and more opportunities for monopoly collusion on prices;
transaction price, by which the offeror receives the contract.
The relationship between offer prices and actual transaction prices depends on the type of tender and the level of competition. During public auctions, the degree of competition between participants is quite high and the actual price may be significantly lower than the offer price. In closed auctions, the price levels of actual transactions and offers differ slightly. The form of trading is a promising area of trading activity, and its scope is constantly expanding.
2. Analysis of exchange prices
2.1 Approaches to the analysis of exchange prices
To analyze stock prices, we will use the Dow Theory, in which it is necessary to study six basic postulates, with which most analysts are already familiar:
1. The price takes everything into account. According to the Dow Theory, any factor that can in one way or another affect supply or demand will invariably be reflected in the price. Regardless of the nature and causes of events, they are instantly taken into account by the market and are reflected in price dynamics.
2. There are three types of trends in the market. The Dow's definition of trend is as follows: In an uptrend, each subsequent peak and each subsequent decline is higher than the previous one. That is, an upward trend should take the form of a curve with successively increasing peaks and troughs. Accordingly, with a downward trend, each subsequent peak and decline will be lower than the previous one. This trend definition is still fundamental and serves as the starting point for trend analysis. Dow also identified three categories of trends: primary, secondary and minor. He attached the greatest importance to the primary, or basic. The main trend lasts several years and can be either bullish or bearish. Second-order movements last from several weeks to several months and can go in the opposite direction to the main trend. Third-order movements are oscillations with a period of several days.
3. The main trend has three phases. A market trend has three phases. Phase one, or accumulation phase, when the most far-sighted and informed market participants begin to buy first. The second phase occurs when investors using technical methods of following trends join the price rise. Prices are already rising rapidly, and the perception of this market is becoming increasingly optimistic. The trend then enters its third or final phase when the general public gets involved and a media-driven frenzy begins in the market. It is at this stage that those informed investors who bought during the first phase, when no one wanted to buy, begin to “distribute”, that is, to sell when everyone, on the contrary, is trying to buy.
4. Indexes must confirm each other. In the original, the Dow meant the industrial and railroad indices. In his opinion, any important signal for an increase or decrease in the exchange rate on the market must pass through the values of both indices. In other words, we can talk about the beginning of an upward trend only if the values of both indices have covered their previous intermediate peaks. If this happens with only one index, then it is too early to talk about an upward trend in the market rate. If the indices show different dynamics, this means that the previous trend is still in effect. Currently, this principle of the Dow theory is expressed in the need to confirm signs of a trend change with additional signals.
5. The trading volume should confirm the nature of the trend. Trading volume, according to Dow, is an extremely important factor in confirming signals received from price charts. If the underlying trend is up, volume increases in line with rising prices. Conversely, volume decreases when prices fall. If the main trend is downward, then everything happens exactly the opposite. In this case, a decrease in prices is accompanied by an increase in volume, and during intermediate price increases, the volume decreases. However, it must be noted again that volume is only a secondary indicator. Buy and sell signals, according to the Dow Theory, are based solely on closing prices. Volume indicators have one main purpose - to determine in which direction volume is increasing. And then this information is compared with price dynamics.
6. A trend continues until it gives clear signals that it has changed. This position, in fact, underlies all analytical methods of trend following. It means that the trend that started the movement will tend to continue it. Of course, identifying trend reversal signals is not so easy. But analyzing support and resistance levels, price patterns, trend lines, moving averages - all of this, among other technical tools, will help you understand that there is a turning point in the dynamics of the existing trend. And with the help of oscillators, signals that a trend is losing strength can be received even earlier. The likelihood that an existing trend will continue is usually higher than the likelihood that it will change. By following this simple principle, you will be right more often than not.
2.2 Fundamental Analysis and Technical Analysis
Technical analysis looks at the probability that a given situation will achieve a certain outcome - and in some cases this probability is very high.
The first known case of recording price dynamics with its subsequent analysis is attributed to the inventor of the Japanese candlestick method, Munehise Homma (late 18th century). But the foundations of classical technical analysis and its principles were first outlined in the works of Charles Dow in the late 1890s. These works were published in newspaper articles only in 1900-1902. Dow worked at the New York Stock Exchange and used his methods to analyze the American stock market. It was he who later organized the Dow Jones Information Service and the Wall Street Journal.
The subject of the study of technical analysis is the change in the dynamics of stock prices in the past in order to determine what it will be in the future, while fundamental analysis studies economic forces of supply and demand , which cause price fluctuations and cause them to go up and down, or remain at the existing level.
The fundamental approach takes into account all the factors that influence the price of a commodity to determine its intrinsic or actual value (in the stock market, the commodity is securities). Fundamental analysis states that it is this actual value that reflects how much a particular product should actually cost. And if the actual value is lower than the market price of the product, then the product must be sold, since they are giving more for it than it actually costs. If the actual cost is higher than the market price of the product, then you need to buy it, because it is cheaper than it actually costs. In this case, they proceed exclusively from the laws of supply and demand.
Both of these approaches to forecasting market dynamics attempt to solve the same problem, namely:
Determine in which direction prices will move. But they approach this problem from different ends. . If a fundamental analyst is trying to understand the reason for the market movement, a technical analyst is only interested in the fact of this movement . All he needs to know is that such a movement or change in market dynamics occurred, and what exactly caused it is not so important. But a fundamental analyst will try to figure out why this happened. And many specialists working with exchange commodities (securities, various futures, currencies, etc.) traditionally classify themselves as either technical or fundamental analysts. In fact, the border here is very blurred. Many fundamental analysts have at least basic chart analysis skills. And there is even a humorous statement that if you have even once looked at a stock price chart, then you have already performed its graphical (technical) analysis. At the same time, perhaps, there is no technical analyst who does not, at least in general terms, imagine the main provisions of fundamental analysis. (Although there are still “fighters for the faith” among the latter, they are called “purists” in the USA; they strive at any cost to prevent “fundamental infection” from entering their technical and analytical sanctuary).
At the moment when the market, it would seem, has taken into account all the known economic parameters, a new process begins and, at first almost imperceptibly, and then increasingly, prices begin to react to some completely new, not yet known factors. The most significant periods of rising and falling prices in history began in an environment where nothing, or almost nothing, in terms of fundamentals, indicated any change. When these changes became clear to fundamental analysts, the new trend was already developing in full force.
The founders of the Western theory of fundamental analysis are considered to be Benjamin Graham and David Dodd, who published the book “Security Analysis” in 1934 in the USA. The concept of "fundamental analysis" was first introduced in this book, and was also defined as a tool for predicting future stock prices.
Later, in scientific publications, fundamental analysis was defined as the process of studying the state of the economy, industry and financial position of an individual company in order to determine the market value of its shares. An assessment of many external and internal factors that significantly influence the financial and economic activities of a company, the results of which are reflected in the market value of its securities, is fundamental analysis. Such factors include the activities of competitors, the political situation in the country, the effectiveness of management, strict observance of the rights of the company’s shareholders, the financial position of the company, as well as many other factors.
The main purpose of fundamental analysis is to determine the current market value of a security in order to make appropriate investment decisions. Here's what William F. Sharp, Gordon J. Alexander and Jeffrey W. Bailey say in their book Investing: “Fundamental analysis assumes that the “true” (or intrinsic) value of any financial asset is equal to the present value of all cash flows that the owner of the asset expects to receive in the future." In other words, we are talking about assessing the value of the shares of the issuing company based on an analysis of the company’s ability to make a profit.
The fundamental approach to stock analysis is based on the premise that shares of successful companies rise in value, while shares of unprofitable companies fall in value. The shareholder is a co-owner of the business, therefore, the more profitable the business becomes, the more expensive the share in this business (shares) should be worth. And, conversely, if a company continuously incurs losses and its debt to creditors increases, then the value of such a company will decrease.
The objectives of fundamental analysis are to determine the degree of undervaluation or overvaluation of the shares of the issuing company based on an analysis of the cash flows generated by the company. The result of such analysis will be the adoption of decisions on the management of the securities portfolio.
A complete fundamental analysis should be built on a three-level basis:
1. Analysis of macroeconomic factors:
State of the national economy;
Economic policy of the state;
Political situation;
Legal regulation;
Conjuncture of world commodity and financial markets.
2. Analysis of industry factors:
Competition within the industry;
Current cyclicality;
Life cycle stage and industry state.
3. Analysis of microeconomic factors:
Company management;
Business building model;
Market food niche;
Technical condition, technology used;
Scientific and innovative potential;
Financial condition;
Investment projects;
Dividend policy;
Shareholding structure;
Quality of corporate governance;
Transactions with company shares.
For a portfolio investor to use fundamental analysis of stocks, it is necessary to have a mature, efficient securities market, which is expressed in the presence of liquidity, sufficient capitalization, developed infrastructure, etc.
In recent years, with the development of computer technology, many sections of technical analysis, seemingly already firmly forgotten, have found new life due to the dramatic simplification of their calculations, as well as free automatic testing of their effectiveness over large historical intervals.
3. Reasons for price fluctuations on the stock exchange in the Russian Federation
3.1 Setting prices for certain types of securities
Government securities. For government securities, the price level depends on:
1) on the type of securities;
2) acceptance of the terms or conditions for their release;
3) current economic and political conditions.
Corporate bonds. Setting the offer price for corporate bonds is quite difficult, since it is impossible to find a comparable option with a similar rating and maturity. Typically the conversion equivalent (K) is used. This is the discounted price at which a stock must trade in order for it to be exactly equivalent to a bond.
3.2 Stock market prices and reasons for their fluctuations
First of all, it should be noted that the exchange does not “make” prices. It only states them and objectively contributes to their formation. Exchange rates are market prices that arise and change under the influence of the evolution of supply and demand. The exchange concentrates the process of supply and demand, and the result of their comparison is the price as an expression of equilibrium, temporary and relative, but sufficient to carry out a particular transaction. Thus, rates serve as a general indicator of securities market conditions. Their determination involves various factors influencing the supply and demand for specific securities.
To a large extent, the size of the rates depends on how buyers and sellers assess their value. The positions of participants in exchange transactions largely depend on information about the issuing enterprises, their prospects, the situation in the economy and much more. The degree of completeness of information, its updating, and accessibility to the general public have a great influence on the evolution of courses.
When assessing factors affecting stock exchange rates, two approaches are possible. With one, the emphasis is on the scientific analysis of objective mechanisms under the influence of which prices are formed. Another approach focuses more on subjective factors.
The first approach is well described by S.V. Pavlov. He emphasizes that the value of paper for an investor lies, first of all, in the fact that it brings him a certain income. The overall level of return is compared to the risk borne by the security holder. This ratio is used to compare the profitability and riskiness of placing the same amount of money in a bank, and the possibilities of purchasing other goods with this amount. The right to manage the company, which the investor acquires along with the purchased shares, and the possibility of obtaining additional profit from establishing control over the enterprise are also taken into account. It is important to take into account the degree of distribution of acts of purchase and sale of these types of securities, which allows the owner, if desired, to get money for them.
Thus, a set of factors influencing exchange rates is identified:
1) yield, current and expected interest on bonds, expected dividend amounts plus the possibility of increasing additional profits from control;
2) the amount of loan interest, which makes placing money in a bank more or less attractive;
3) the degree of investment risk, which is determined by the stability of the balance and prospects for economic growth, the reliability of the financial system;
4) the presence of alternative areas for investing funds - the situation in commodity and other markets;
5) liquidity, that is, the scale of distribution of joint-stock enterprises, the degree to which they use securities to raise funds.
The two most important indicators are profitability and loan interest. The higher the yield, the higher the exchange rate of this security should be. The relationship with the size of the loan interest is inversely proportional - the higher it is, the greater the interest of the saver in placing his funds in the bank. And this reduces the demand on the stock market for securities and thereby contributes to a decline in their exchange rate.
An example is the approach of the world famous scientist D.M. Keynes. In the work “Money Game” he acts as a stock exchange player, which he was for a long time. The main mistake of any scientific approach to this problem, according to Keynes, is that investors are ascribed rational behavior, and the goal of their operations is considered only to maximize financial income. The bulk of investors, he believes, rely on everything except analysis - from intuition to the sound of the company name. Therefore, Keynes recommended that investors pay more attention to psychological factors and “gut feelings.”
Both the history of the stock exchange business (remember Nathan Rothschild) and modern practice speak about the enormous importance of using information inaccessible to others. It is not for nothing that this area is subject to regulation by the state. Thus, in the United States, the Securities Trading Act of 1934 prohibited manipulation to change market opinion by providing false information. All directors of listed companies are required to report all transactions in their companies' securities to the Securities and Exchange Commission. To limit the use of information not available to small investors, trading on the basis of such information is officially prohibited in many countries. And the violations that are discovered become public and are widely discussed in the press. This was the case in the late 80s in the United States, when the Securities and Exchange Commission several times filed lawsuits against bank employees who, knowing about the impending mergers and acquisitions, carried out transactions with shares of companies participating in the data through shell companies. operations.
Regulations and laws on exchanges, as a rule, do not fix the procedure for determining the exchange rate of securities. A number of exchange charters only indicate that the exchange price should be considered the price that corresponds to the actual state of trade turnover. Exchanges usually publish rate bulletins for the information of their clients, which record the rates of specific securities admitted to transactions on a given exchange. But how do they arise?
When answering a question, stockbrokers usually say that the process of forming rates is very simple, since it is based on comparing orders for sales and purchases and deducing, using elementary arithmetic operations, the value that unites them. In fact, the procedure is not that simple. Let's look at this with a specific example. Let's assume that we know all the requests for sales and purchases of any security received by the broker. Then we could create a summary table that gives an overview of the market structure.
After comparisons have been made and the exchange rate has been determined, trading continues. New applications are received by brokers. The process of comparing them occurs again, and new quotes appear.
Constant fluctuations in securities prices express the normal development of the market situation. But at the same time, conditions may arise under which sharp price changes occur, and many investors become their victims. In order to avoid such “collapses” in prices, special measures have been developed on exchanges. Thus, by decision of the Syndical Chamber of the Paris Bourse, limits for exchange rate fluctuations were established. For example, the difference between the last rate of the previous meeting and the first rate of the current meeting should not exceed 4-5% or 8-10% for various transactions. Other measures are also envisaged to normalize the situation (limitation of transactions on certain securities, complete cessation of trading in them with the publication of data on market disruption in the official bulletin of the exchange, etc.).
3.3 Practical analysis of the relationships between stock exchanges: MICEX and RTS
exchange price trend investment
The development of Russian financial markets is gradually entering the scope of normal economic analysis. The accumulating statistical base allows us to pose a number of questions regarding the patterns of development and functioning of Russian financial markets.
Russian stock exchanges, trading volumes on them and stock prices already provide certain material that allows us to begin the search for stable patterns. Although the period of existence of organized stock trading in Russia is short, the combined use of monthly, daily and hourly observations allows us to pose a number of problems. Among them, naturally, is the question of the relationship between activity on the two exchanges, both in terms of indices and trading volumes, their connection with international indices, and important factors that traditionally influence exchange activity, for example, the dynamics of economic activity in Russia, prices and other. One of the reasons for interest in the dynamics of stock price indices is the slow growth of indices, despite a fairly long economic recovery (Fig. 1).
Figure 1. Dynamics of industrial production indices and stock market indices.
A specific feature of Russian reality is the parallel existence of several stock exchanges with different histories and the nature of their organization:
· RTS - RTS Stock Exchange (formerly "RTS Trading System"),
MICEX - Moscow International Currency Exchange,
· MFB - Moscow Stock Exchange.
Moscow Interbank Currency Exchange (MICEX) is the leading Russian exchange, on the basis of which a nationwide trading system has been created in all main segments of the financial market - foreign exchange, stock and derivatives - both in Moscow and in the largest financial and industrial centers of Russia . Together with its partners (MICEX Clearing House, National Depository Center, etc.), the exchange also provides settlement, clearing and depository services to about 600 organizations - participants in the exchange market. The subject of the MICEX's activities is the organization of trading, settlement, clearing and depository services for participants in the foreign exchange, stock, derivatives and other segments of the financial market.
Having started trading in shares of leading Russian companies only in March 1997, the MICEX has achieved significant success to date. Until August 17, 1998 it ranked 3rd in terms of trading volumes in government securities. As of March 1998, 177 banks and financial companies took part in MICEX trading.
Under the conditions of the “currency corridor” in 1996, the turnover of foreign exchange exchange trading decreased significantly, but the exchange rate remained an important indicator of the market. The Bank of Russia abolished the mechanism for directly linking the official ruble exchange rate to the MICEX and introduced a mechanism for establishing the official exchange rate of the Central Bank of the Russian Federation based on quotes from the exchange and over-the-counter markets. The MICEX introduced a system of currency trading using remote Reuters-dealing terminals, and also began developing a project to create an electronic lot trading system (SELT) for currency. Repo and pawn lending operations began to be carried out in the trading system. The number of GKO dealers increased to 300 organizations, including 120 regional dealers. The MICEX began trading in corporate bonds (RAO VSM), preparing for trading in shares of leading Russian enterprises.
In 1997, the MICEX managed to lay the foundation for the formation of a nationwide system of exchange trading in securities on the basis of its trading and depository complex. Based on the results of transactions in shares, the MICEX began to calculate the Composite Stock Index, which accurately reflected the sharp decline in the securities market in Russia caused by the international stock crisis.
In the first half of 1998, the MICEX continued to develop all sectors of the exchange financial market, focusing on improving the mechanism of trading and settlements for securities and derivatives instruments. As part of the program for creating an interregional trading and depository system for securities, the MICEX and regional exchanges signed a new version of agreements, according to which the regional currency and currency and stock exchanges continued to serve as representatives of the MICEX in the securities market and technical centers for access of regional professional market participants to MICEX trading system.
The installation of new remote workstations has begun, operating in the MICEX trading system via low-speed communication channels. The MICEX transferred the functions of depository services for the market of government, subfederal and corporate securities to the National Depository Center (NDC), established by the exchange and the Bank of Russia. The market for corporate shares and subfederal bonds grew rapidly (the total number of issuers and constituent entities of the Russian Federation is about 100, including Moscow bonds).
The financial crash of 1998 delayed the entry of many shares of “second-tier” companies onto the stock exchanges of Russia and the world. A number of companies, especially oil companies and those with foreign capital, were able to expand their presence on stock exchanges and increase their capitalization. As before, Russian shares in the world are associated with Gazprom, RAO UES, YUKOS, LUKOIL and Rostelecom. Although the structure of exchange indices usually includes dozens of leading stocks, there is a huge concentration of trading in only a few securities of key issuers. On the RTS these are RAO UES, Lukoil, Rostelecom, Norilsk Nickel and Yukos; on the MICEX these are the same participants plus bonds; on the MFB it is Gazprom par excellence. The history of stock indices is still very short. The RTS dates back to mid-1995; the MICEX began trading securities only at the end of 1997. Taking into account the crash and devaluation of August 1998, the actual object of quantitative analysis can be the period starting from 1999.
The main focus of the analysis is on the more well-known and active exchanges: RTS and MICEX. One of the first and natural tasks is the need to determine the degree of their connection - in fact, the equivalent of the question of the unity of the process of forming market valuations of companies. Let's consider the degree of coherence of the trading dynamics of shares of the same name on two exchanges in order to make sure that the market is uniform both in terms of pricing and trading volumes. Both exchanges demonstrate active work and expansion of the range of shares and instruments. At the same time, in 2001 there was a sharp increase in turnover on the MICEX, reflecting both general trends in stock trading and the specific institutional features of the two exchanges (see Fig. 2). Trading volumes on the RTS decreased slightly in 2000-2001 - from $509.7 million to $307.1 million per month, while on the MICEX they increased from $817.8 million to $3636.0 million. dollars per month (converted into dollars at the average monthly rate).
From November 1, 2006, the MICEX Stock Exchange begins daily calculation of additional analytical indicators for securities included in the MICEX stock indices. The new information product includes: security volatility, alpha and beta coefficients, the share of securities and the impact of an individual security on stock indices.
The need to introduce a new information product is due to the growing need to conduct operational analysis of the securities market and, first of all, to analyze the behavior of the most liquid securities included in the MICEX stock indices calculation base.
Features of the development of the modern Russian stock market, in particular the increase in the number of securities traded on the market, as well as the gradual increase in liquidity, make it possible to use a wider range of investment strategies - from the formation of an effective securities portfolio to intraday trading of an individual security. The analytical indicators offered by the MICEX Stock Exchange represent quantitative characteristics of the stock market and are designed to provide support for making investment decisions.
Currently, the MICEX Stock Exchange calculates stock indices that reflect the state of various segments of the Russian securities market. The MICEX Index has been calculated since September 22, 1997 and is a classic market capitalization-weighted index of the market for the most liquid shares of Russian issuers admitted to trading on the MICEX Stock Exchange. To date, the MICEX Index is used as the base index for 11 index mutual investment funds. The RCBI index has been calculated since January 1, 2003 and is a market capitalization-weighted bond index that reflects the pricing environment on the Russian corporate borrowing market.
Differences in trading volumes on exchanges are complexly related to differences in clientele and the nature of transactions. It is believed that the RTS, where trading is carried out in dollars, is operated mainly by investment banks working with stakes in Russian enterprises. At the same time, Russian capital and Russian exchange players dominate the MICEX. This may be why there are two different indices on the MICEX: the standard SFI and the MICEX 10, designed for day traders and allowing one to track the slightest fluctuations in the prices of major financial instruments.
Rice. 2. Dynamics of turnover on the MICEX and RTS
The purpose of the analysis is to show why the capitalization of Russian companies has not grown in recent years in line with the growth of key macroeconomic indicators. Another task is to find a connection between existing indices and stock prices of individual companies from a certain (primary) set of factors, including the influence of the dynamics of stock prices on foreign exchanges.
Trading leading shares of Russian companies.
In fact, index analysis will be determined by the dominance of a limited number of stocks in stock indices. Since trading on the MSE is carried out primarily in Gazprom shares, and the rest occupy the RTS and MICEX platforms to a greater extent, the differences in trading volumes and SFI and RTS indices are determined, first of all, by the trading structure, that is, by the shares that dominate on each of the exchanges.
Table 1 "Characteristics of the dynamics of trading volumes in shares of leading companies (million rubles), (monthly data for the period 2000-2006)"
Thus, fluctuations in trading on the MICEX are 99% determined by fluctuations in trading volumes in shares of Lukoil, RAO UES, Surgutneftegaz and Rostelecom. On the RTS, the leading role is again played by Lukoil, RAO UES, Norilsk Nickel and Rostelecom, whose total contribution accounts for 97% of the fluctuations in the system's trading volumes. If we take into account that Gazprom shares are mainly quoted on the ISE, it turns out that only four companies in Russia dominate the market. One can note (Fig. 3) a higher concentration of the three leading shares in trading volume on the MICEX than on the RTS. On the MICEX there is a high concentration of trading in RAO UES shares - 62.5% versus 24.8% on the RTS.
Rice. 3. Structure of trading shares on stock exchanges.
A fundamentally important feature of Russian exchanges is that the leading traded (liquid) shares represent the natural monopoly sector, primarily the energy sector. It's no surprise that two huge energy companies that weren't broken up in the 1990s have more weight on the stock exchanges. At the same time, they are colossally undervalued, including in comparison with the amount of individual energy companies in the case of, for example, the restructuring of RAO UES (provided that the new formations are well managed). In a country with such huge exports of raw materials as Russia, it would be natural to expect dominance of export companies in the metallurgy, oil, fertilizers, etc. sectors. However, so far only LUKOIL and YUKOS are in the top rank of companies in terms of capitalization and trading activity. A number of food industry companies look promising, but so far they have little impact on the overall volume of activity on the exchanges. An important feature and disadvantage of natural monopolies is their dependence on administered prices. This puts them indirectly in a position of dependence on state policy in the field of savings and inflation control, as shown by the debates and decisions of the Government of the Russian Federation in January 2002 to limit the increase in tariffs of Gazprom and RAO UES in a given year within 20%, that is, close to expected inflation .
In this regard, the growth of the capitalization of Russian companies (and, accordingly, stock exchanges) will depend on the position of the above key players, as well as the speed of replenishment of the ranks of “blue chips” and the expansion of active trading coverage of export and processing companies. The quality of management, transparency of accounting and finance (taking into account the new “Arthur Andersen Syndrome”), and improving the quality of corporate governance in general will be conditions for capitalization growth. However, it is worth emphasizing again that in the short term the situation on the stock exchanges seriously depends on 4-5 companies.
The development of the Russian private financial sector was interrupted by the crisis. Trends in the development of financial markets, especially the banking sector, have changed; non-bank financial institutions have suffered losses, especially due to the default of state bonds. Sharp devaluation, economic recession and a series of bank failures created a new situation for development. Attempts to maintain the ruble exchange rate meant indirectly a sacrifice to the stock market and a gradual slide of GKOs towards default, as can be seen in Table 5. The economic recovery of 2000-2002 changed the situation in the country and created general preconditions for a revival in the financial markets.
Table 5 "Indicators of the financial crisis of 1997-1998."
Index |
RTS Index |
Weighted average yield of GKOs |
Exchange rate |
||||
(rub./dol.) |
|||||||
Change |
|||||||
Change |
|||||||
Change |
|||||||
Change |
The recovery of indices on Russian stock exchanges was slow, despite significant (and for many unexpected) growth in GDP and industrial production. To a certain extent, it can be said that the stock market more accurately reflected the progress of reforms, the strengthening of property rights and the growth of profitability of production. Thus, the post-crisis recovery of gross economic activity indicators has not yet been able to radically change the state of the Russian stock exchange and ensure an influx of capital. The growth of macroeconomic indicators, of course, is only part of the factors determining the stock market, which has taught investors a lot. We can talk about a significant strengthening of the level of the exchange rate on the RTS in 2002 and 2005, with a forecast of growth to 400 points by the end of 2005, with moderate rates of economic growth in the Russian Federation (about 4% of GDP). In fact, the 400 mark was already passed in May. The general situation of stability contributes to the growth of stock prices. In addition, a large volume of takeovers of enterprises, although happening “behind the scenes,” has an impact on the stock exchange.
Data on the trading structure show that most Russian monthly indices, for which statistics can be available for 5 years, have almost similar coefficients of variation (about 0.5). The spread of hourly data on the MICEX index was higher than on the RTS, which apparently reflected a higher trend component on the former. Thus, during the period 2005 to 2006, the RTS index grew from 98 to 202 points (by 48.5%), and the MICEX index (SFI) from 95 to 184 points (by 51.6%).
Analysis of the graphical representation of monthly data made it possible to identify the period since the beginning of 2000 as relatively homogeneous. This choice is confirmed by the Chow breakpoint test. For a number of variables, there is a break point at 2005. Further analysis of all data was carried out for the homogeneity period. Thus, almost the entire period of economic growth was involved in the analysis of activity indicators of Russian exchanges (Fig. 4).
For the analysis, monthly data on stock indices were used: the SFI and RTS indices in currency values, the AK&M index, as well as data on trading volumes on the MICEX and RTS, million rubles. In addition, a number of macroeconomic indicators were considered: average export price of crude oil, dollars/ton (OIL); average wholesale prices for oil, thousand rubles/ton (OIL); gas, thousand rubles/m(GAS); electricity, thousand rubles/thousand kWh. (ENERGY); natural gas production, billion cubic meters, seasonally smoothed at the annual level (GAS_PRODUCTION); oil production, million tons, seasonally smoothed at the annual level (OIL_PRODUCTION); exchange rate, rub/dollar (WELL); volume of industrial production, million rubles. at prices 12.92 (PP); Consumer Price Index (CPI), SP 500 Index (SP 500), MSCI Emerging Markets Index (EMI).
All three stock indices (including AKM) showed a lagged dependence on the RDI index, which indicates a gradual convergence in the dynamics of stock market indicators of countries with emerging markets during the period under review.
Conclusion
The current stage of development of economic relations has shown that exchanges and the exchange trading mechanism have firmly established themselves as one of the most important mechanisms for carrying out trading operations. In fact, any exchange is only a logical development and streamlining of another auxiliary trading structure - the market. The main problem that stood in the way of increasing trading turnover in the markets was successfully overcome on the stock exchange. This problem was the availability of the goods being sold. The trading mechanism of the exchange is built in such a way that for the very fact of concluding a transaction, the presence of goods in close proximity to the buyer and seller is not necessary. The abstractionism of exchange trading relations is developing so much that in practice (and on some exchanges this is often what happens) it happens that the goods for which the transaction is being concluded are not available to the seller or this goods do not exist in nature at all. This key idea of the absence of a tradable commodity allowed the trading turnover of exchanges to increase to stunning proportions, comparable to the gross domestic products of developed capitalist countries.
It should also be noted that stock prices are very strongly influenced by both the political situation in the country and other factors.
Posted on Allbest.ru
...Similar documents
The place and role of the stock exchange in the financial market. Transactions carried out on the stock exchange. Practical analysis of the relationships between stock exchanges: MICEX and RTS. The need and goals of government regulation. Forms and instruments of state regulation.
course work, added 01/25/2009
The stock exchange is a secondary market for securities. The essence and purposes of the stock exchange. Problems of forming stock exchanges in the Republic of Kazakhstan. Stages of development of the stock market of Kazakhstan. Analysis of transactions with securities on the stock exchange in Kazakhstan.
course work, added 12/06/2008
History of the creation of stock exchanges. Signs, functions and types of stock exchanges. Methods of organizing exchange trading. Types of exchange transactions, stock indices. Russian stock exchanges and their role in the modern economy. Securities traded on exchanges.
course work, added 05/10/2016
History of the creation and evolution of the stock exchange. Basic principles of the organization and functioning of stock exchanges using the example of the securities exchange in Frankfurt am Main. Characteristics of the world's largest stock exchanges. Publicity and openness of exchange trading.
course work, added 10/17/2010
Studying the features of the activities of Stock Exchanges in Russia. Main types of exchange transactions. Classifications of futures transactions, analysis of the main types and mechanisms for their execution. Analysis of the risks of the RTS group arising in the process of carrying out derivatives transactions.
course work, added 12/20/2010
Stock exchange concept. Instruments and subjects of the securities market. The emergence and development of exchanges. Analysis of the specifics of the functioning of the New York Stock Exchange. History of the development of Russian stock exchanges. Directions for improving their functioning.
thesis, added 07/16/2010
Definition of stock exchange. Primary and secondary securities. Derivative financial instruments. Calculation of stock indices. Major world indices. Analysis of the dynamics of the activities of world stock exchanges in an unstable economic situation.
course work, added 04/07/2011
The history of the development and functions of the largest exchanges in the world, their governing bodies. P. Hilferding and his definition of the stock exchange, securities as the main instrument of the stock exchange. Necessary conditions for starting stock exchange operations: principles of operation of the stock exchange.
course work, added 07/14/2008
The emergence of stock exchanges, their functions, features of organization and management. Exchange trading participants. Stages of a securities transaction. Main types of exchange transactions. Features of the emergence and functioning of stock exchanges in Russia.
course work, added 04/02/2009
Stock exchanges in Russia and abroad. International and Russian requirements for stock exchanges. Organizational structure and members of stock exchanges. Comparative characteristics of stock exchanges. Prospects for the development of stock exchanges in Russia.