Trading and Technical Analysis - Assignment Example

Trading and Technical Analysis Trading and Technical Analysis Technical analysis involves theanalysis of the market to understand the various factors causing changes in the prices. This analysis enables investors to make investment decision. The analysis provides assistance to investors to make informed decisions regarding the future trends within the market, which they are trading. The analysis is undertaken through making an evaluation of statistical information regarding market activities(Aronson, 2011).

The analysis utilises historical market information and volume data in making predictions of the anticipated market trends in the future. The analysis is based on the assumption that market trends commonly repeat themselves over a period of time, making historical information become increasingly significant in the analysis. When making purchases in trading deposits must be made in full amount before a transaction can be completed. Additional funds can however be added if the presented funds are not enough for the transaction.

Additional fund a must be added within seven days of the trading period. Amounts deposited after the trading period cannot be accepted in undertaking the transaction. Uniform comparison refers to the comparison of markets through the utilisation of fundamental and technical analyses. This involves the utilisation of similar data in making financial decisions. Technical analysis enables an individual to make purchasing decisions while the long-term investment decisions are made through the application of fundamental economic analysis(Gregoriou, 2010).

A DK notice describes a terminology utilised by traders in describing a comparison of confirmation of transactions. This notice is sent to a party when one party receives a confirmation which it does not recognise. This notice is commonly utilised by the party with insufficient information in seeking to be provided with the information. The notice is settled by provision of the requested information. The Moving Average Convergence/divergence (MACD) refers to an indicator of technical analysis utilised in determining various elements defining the trend of market prices.

The calculation of the values utilises historical information regarding the closing prices on stocks. The approach is utilised in analysing price shifts over a specified duration of time. The data involves making comparison of the average prices for a period of time, hence enabling traders to make investment decisions based on the historical analysis of prices, within the stock market(Chen, 2010). The moving averages are utilised in highlighting the most current price changes, and the MACD line is utilised to gauge the trend of the stock prices.

The 50 day moving average for 3M Company is 132.5 with a change of 0.07% on the stock prices. The moving average remains a fundamental indicator of making comparison between two moving averages presented within a financial report. The company has a positive MACD which is an indication of fast EMA trending above the slow EMA. This has been the trend for the last 50 days and the stock of the company appears to be increasingly stable. The fast EMA has not trended below the slow EMA. The MACD histogram for the company has not dropped below the centre line hence the company stocks has remains above the centre line.

According to the MACD technical analysis of the company the best investment strategy on the short-term for the company would be buy the company stock. Selling these stocks on the long-term investment would also not be a good investment option. Order would be limited according to the percentage of risk being conducted to ensure relativity. References Aronson, D. (2011). Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals (p. 544). New Jersey: John Wiley & Sons. Chen, J. (2010).

Essentials of Technical Analysis for Financial Markets. New Jersey: John Wiley & Sons. Gregoriou, G. N. (2010). Stock Market Volatility. New York: Taylor & Francis.