Does Technical analysis really work?


3 min read
Does Technical analysis really work?


Suppose you have 1 lakh Rs. and you need maximum returns.

Case 1) You are a short term trader.

Technique: Death Cross and Golden Cross

Death Cross: This is the combination of two moving averages. It is used when a shorter-time frame moving average crosses over a higher-time-frame moving average, indicating a trend reversal in favor of the bears. This pattern as a bearish indicator.

Golden Cross: This is the opposite of the death cross. When the short-term moving average of a stock or index moves above the long-term moving average. This pattern as a bullish indicator.

Here I am using 25 Day moving average and 100 days moving average.

Trade 1: 20% upside = 1,20,00 Rs.
Trade 2 : 16% further upside = 1,39,00 Rs.
Trade 3: 6% downside = 130,000 Rs.
Trade 4: 13% downside = 114,000 Rs.

Stock: Take any stock you like ( volatile stock is preferable).

Like Kaun Banega Crorepati, you can quit anytime and lifeline is you can put a stop loss of 5%. Whenever stock goes down 5% you can exit.

Possible upside: no limit
Possible downside: 10–15% (5% with stop loss).

Sometimes short term trades show massive upside/downside move, like today Jet Airways, soared 122% in a day.


Case 2) You are long term investor

Here I am using 50 Day moving average and 200 days moving average.

Technique: Death Cross and Golden Cross

Same stock, Tata Chemical


Trade 1: 61% upside = 1,61,00 Rs.
Trade 2 : 64% further upside = 2,64,00 Rs.



Stock: Take any stock you like ( volatile stock is preferable).

Here also you can quit anytime and lifeline is you can put a stop loss of 5%. Whenever stock goes down 5% you can exit.

Possible upside: no limit

Possible downside: 10–15% (5% with stop loss).

Important: Not just the Golden cross and Death cross. You can also use Relative Strength Index (14), Stochastic %K (14, 3, 3), Awesome Oscillator, Momentum (10), MACD Level (12, 26), Stochastic RSI Fast (3, 3, 14, 14) , Williams Percent Range (14), Bull Bear Power, Ultimate Oscillator (7, 14, 28)), Exponential Moving Average (5)
Simple Moving Average, Exponential Moving Average, Ichimoku Cloud Base Line (9, 26, 52, 26), Volume Weighted Moving Average (20), Hull Moving Average (9).

Hence proved, Technical Analysis is effective and easy, isn’t it?


Note: Analysis of financial markets is either fundamental or technical. Fundamental analysis focuses on financial statements in assessing the condition of a company and in predicting its future performance. Technical analysis focuses on a stock’s historical price pattern, as portrayed on charts, to predict future price movements. Without proper knowledge about the stock market never try to dive in. With every good thing, there is a dark side, the Indian stock market is the fastest wealth destroyer also in case you invest without proper knowledge about how it works. Here, if one is making BIG means on the other side somebody is BIG.

If you are new to the stock market then follow these 8 steps for kick start here:

All the best.

Akshay Seth
| Linkedin

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