{"id":17284,"date":"2022-01-21T18:59:01","date_gmt":"2022-01-21T18:59:01","guid":{"rendered":"https://www.5paisa.com/finschool/?post_type=markets\u0026#038;p=17284"},"modified":"2025-12-19T18:33:04","modified_gmt":"2025-12-19T13:03:04","slug":"application-to-asset-classes","status":"publish","type":"markets","link":"https://www.5paisa.com/finschool/course/technical-analysis-course/application-to-asset-classes/","title":{"rendered":"Application to Asset Classes"},"content":{"rendered":"\u003cdiv data-elementor-type=\u0022wp-post\u0022 data-elementor-id=\u002217284\u0022 class=\u0022elementor elementor-17284\u0022\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-23ba90b elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\u0022 data-id=\u002223ba90b\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container 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data-title-link=\u0022study-tab\u0022\u003e\u003cp\u003e\u003cdiv class=\u0027white\u0027 style=\u0027background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;\u0027\u003e\u003cdiv id=\u0027text_slider\u0027 class=\u0027owl-carousel sa_owl_theme owl-pagination-true\u0027 data-slider-id=\u0027text_slider\u0027 style=\u0027visibility: visible;visibility:visible;\u0027\u003e\u003cdiv id=\u0027text_slider_slide01\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Application-on-Asset-classes\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e2.1 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003eApplication on Asset classes\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003ca href=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Dark-analytics-pana.svg\u0022\u003e\u003cimg fetchpriority=\u0022high\u0022 decoding=\u0022async\u0022 class=\u0022size-full wp-image-17143 aligncenter\u0022 role=\u0022img\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Dark-analytics-pana.svg\u0022 alt=\u0022\u0022 width=\u0022750\u0022 height=\u0022500\u0022 /\u003e\u003c/a\u003e\u003c/p\u003e\u003cp\u003eThink technical analysis as attempting to ride a bicycle. Once you’ve mastered the balance, pedaling, and steering, you can ride any kind of bike, mountain, road, or electric. Similarly, once you understand how to read price charts, patterns, and indicators, you can apply that knowledge to any asset class-stocks, commodities, currencies, bonds, you name it.\u003c/p\u003e\u003cp\u003ePractically any asset with historical price data such as the open, high, low, close and volume, quantified over a given time period with the same tools and techniques is analyzable. These parameters collectively form what is referred to as TA.\u003c/p\u003e\u003cp\u003eThe ability of working with price data is what differentiates technical analysis from any other analysis, including fundamental analysis.\u003c/p\u003e\u003cp\u003eA fundamental analysis changes more with an asset class than any other methods.\u003c/p\u003e\u003cul\u003e\u003cli\u003eWith equities, the study of financial statements, earnings, and estimating the overall company health is a requirement.\u003c/li\u003e\u003cli\u003eFor agricultural commodities such as coffee and pepper, the analysis involves the study of weather patterns, the cycles of harvest, and global demand and supply.\u003c/li\u003e\u003cli\u003eThe same analysis also applies to the economic and geopolitical factors pertaining to energy and metals.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide02\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Principles-of-Price-Action\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e2.2 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003ePrinciples of Price Action\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76015 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Principles-of-Price-Action-1.png\u0022 alt=\u0022Principles of Price Action\u0022 width=\u0022450\u0022 height=\u0022460\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Principles-of-Price-Action-1.png 450w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Principles-of-Price-Action-1-293x300.png 293w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Principles-of-Price-Action-1-50x50.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Principles-of-Price-Action-1-98x100.png 98w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Principles-of-Price-Action-1-150x153.png 150w\u0022 sizes=\u0022(max-width: 450px) 100vw, 450px\u0022 /\u003e\u003c/p\u003e\u003cp\u003ePrice action refers to the movement of a security’s price over time. It is the foundation of technical analysis and represents the most direct reflection of market behaviour. Rather than relying on external data such as financial statements or macroeconomic indicators, price action focuses on how buyers and sellers interact in the market. This interaction is captured through price charts, which reveal patterns, trends, and potential turning points.\u003c/p\u003e\u003cp\u003eThere are three core principles that guide the study of price action:\u003c/p\u003e\u003col\u003e\u003cli\u003e\u003cstrong\u003e\u003cb\u003e Price Reflects All Available Information\u003c/b\u003e\u003c/strong\u003e\u003c/li\u003e\u003c/ol\u003e\u003cp\u003eThe first principle assumes that the current market price incorporates all known and anticipated information. This includes earnings results, economic data, geopolitical developments, and investor sentiment. Since the market continuously processes new information, the price is considered a comprehensive and real-time indicator of collective expectations. As a result, technical analysts prioritize price movements over external news or reports.\u003c/p\u003e\u003cp\u003eSuppose a company is about to release its quarterly earnings. A few days before the announcement, the stock starts rising steadily. Even though the earnings report hasn’t been published yet, market participants may already be anticipating strong results based on insider activity, analyst expectations, or industry trends. When the actual earnings are released and they match expectations, the stock may not move much further because the good news was already \u0026#8220;priced in.\u0026#8221;\u003c/p\u003e\u003cp\u003eThis shows how the market often reacts in advance, and why technical analysts focus on price rather than waiting for news.\u003c/p\u003e\u003col start=\u00222\u0022\u003e\u003cli\u003e\u003cstrong\u003e\u003cb\u003e Prices Tend to Move in Trends\u003c/b\u003e\u003c/strong\u003e\u003c/li\u003e\u003c/ol\u003e\u003cp\u003eThe second principle is based on the observation that prices often move in identifiable directions for extended periods. These movements are categorized as uptrends, downtrends, or sideways trends. Once a trend is established, it is more likely to continue than to reverse immediately. Identifying the direction and strength of a trend allows traders to align their positions with the prevailing market momentum, improving the likelihood of favourable outcomes.\u003c/p\u003e\u003cp\u003eConversely, if the stock had been forming lower highs and lower lows, it would signal a downtrend, and a trader might look for opportunities to sell or short the stock. In both cases, recognizing the trend early and trading in its direction increases the probability of a successful outcome, which is the essence of this principle in price action analysis.\u003c/p\u003e\u003col start=\u00223\u0022\u003e\u003cli\u003e\u003cstrong\u003e\u003cb\u003e Historical Patterns Tend to Repeat\u003c/b\u003e\u003c/strong\u003e\u003c/li\u003e\u003c/ol\u003e\u003cp\u003eThe third principle is rooted in the idea that market Behavior is influenced by human psychology, which tends to be consistent over time. As a result, certain price patterns appear repeatedly in different market conditions. These patterns, such as double tops, flags, and triangles, are studied to anticipate future price movements. By recognizing these recurring formations, traders can make informed decisions based on historical precedents. Let us understand with the help of example.\u003c/p\u003e\u003cp\u003eSuppose the stock of ABC Ltd. begins trading at ₹200 in January. Over the next three months, it consistently forms higher highs and higher lows, gradually climbing to ₹280 by March. This sustained upward movement, visible on a candlestick chart, indicates an uptrend. A technical analyst observing this trend might use a moving average or trend line to confirm the direction and look for buying opportunities during temporary pullbacks such as when the price dips to ₹260 before resuming its rise.\u003c/p\u003e\u003cp\u003eNow consider a different scenario: XYZ Ltd. has been declining from ₹500 to ₹400 over a two-month period, forming lower highs and lower lows. This pattern signals a downtrend. A trader might wait for a minor rally to ₹420 and then enter a short position, anticipating that the price will continue falling in line with the established trend.\u003c/p\u003e\u003cp\u003ePrice Action principles highlight the vital role of chart types, they are the lens through which price behavior is seen and understood. Since price action relies on identifying trends, patterns, and turning points based on historical price movements, the choice of chart becomes crucial in how clearly these elements are perceived. Different chart types such as line charts, bar charts, and candlestick charts offer varying levels of detail and visual clarity, each catering to specific analytical needs. Understanding these chart formats allows traders to better capture the nuances of price behavior, making it easier to apply the core principles of price action effectively in real-world trading scenarios.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide03\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Trade-Summary\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e2.3 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003eTrade Summary\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76003 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Trade-Summary-2.png\u0022 alt=\u0022Trade Summary (2)\u0022 width=\u0022400\u0022 height=\u0022409\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Trade-Summary-2.png 400w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-Summary-2-293x300.png 293w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-Summary-2-50x50.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-Summary-2-98x100.png 98w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-Summary-2-150x153.png 150w\u0022 sizes=\u0022(max-width: 400px) 100vw, 400px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-75997 size-medium\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Trade-summary-300x238.png\u0022 alt=\u0022Trade summary\u0022 width=\u0022300\u0022 height=\u0022238\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Trade-summary-300x238.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-1024x811.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-768x608.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-1536x1216.png 1536w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-2048x1622.png 2048w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-50x40.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-100x79.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Trade-summary-150x119.png 150w\u0022 sizes=\u0022(max-width: 300px) 100vw, 300px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eImagine a stock named Infosys Industries trading on the Indian stock exchange. The market opens at 9:15 AM, and the first trade for Infosys executes at ₹320, this becomes the Open Price. As the day progresses, investor optimism drives the price up to ₹340, which marks the High Price for the session. Later, due to some intraday profit booking, the stock dips to ₹310, establishing the Low Price. Toward the end of the session, buying interest returns, and the stock closes at ₹335, this is the Close Price.\u003c/p\u003e\u003cp\u003eNow, consider that thousands of trades occurred throughout the day at various price points between ₹310 and ₹340. Tracking each of these trades individually would be overwhelming and unnecessary for most traders. Instead, summarizing the day’s activity using just the four key data points Open, High, Low, and Close (OHLC), provides a concise and meaningful snapshot of the stock’s behavior.\u003c/p\u003e\u003cp\u003eFor example, the fact that Infosys opened at ₹320 and closed at ₹335 suggests a positive trading day, indicating bullish sentiment. The high and low prices show the range of volatility and help traders assess risk and potential breakout or support levels. These OHLC values are then plotted on charts especially candlestick or bar charts to analyze patterns, trends, and market psychology.\u003c/p\u003e\u003cp\u003eThis method of summarizing price action is not only efficient but also essential for technical analysis, as it allows traders to focus on significant price levels rather than getting lost in the noise of every individual trade.\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide04\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Key-Takeaways\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e2.4 Key Takeaways\u003c/strong\u003e\u003c/span\u003e\u003cb\u003e\u003c/b\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76004 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Key-Takeaways-1.png\u0022 alt=\u0022Key Takeaways\u0022 width=\u0022444\u0022 height=\u0022418\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Key-Takeaways-1.png 444w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-1-300x282.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-1-50x47.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-1-100x94.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-1-150x141.png 150w\u0022 sizes=\u0022(max-width: 444px) 100vw, 444px\u0022 /\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eTechnical Analysis (TA) studies price and volume to understand market behavior and forecast future movements.\u003c/li\u003e\u003cli\u003eIt rests on three core beliefs: market discounts everything, prices move in trends, and history repeats itself.\u003c/li\u003e\u003cli\u003eTA is not about predicting the future—it’s about identifying high-probability trading setups.\u003c/li\u003e\u003cli\u003eCrowd psychology drives price patterns, and TA helps decode these emotional cycles.\u003c/li\u003e\u003c/ul\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003cscript type=\u0027text/javascript\u0027\u003ejQuery(document).ready(function()  {jQuery(\u0027#text_slider\u0027).owlCarousel({items  :  1,smartSpeed  :  400,autoplay  :  false,autoplayHoverPause  :  false,smartSpeed  :  400,fluidSpeed  :  400,autoplaySpeed  :  400,navSpeed  :  400,dotsSpeed  :  400,dotsEach  :  1,loop  :  false,nav  :  true,navText  :  [\u0027Previous\u0027,\u0027Next\u0027],dots  :  true,responsiveRefreshRate  :  200,slideBy  :  1,mergeFit  :  true,autoHeight  :  true,mouseDrag  :  false,touchDrag  :  true});jQuery(\u0027#text_slider\u0027).css(\u0027visibility\u0027, \u0027visible\u0027);var  owl_goto  =  jQuery(\u0027#text_slider\u0027);jQuery(\u0027.text_slider_goto1\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  0);});jQuery(\u0027.text_slider_goto2\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  1);});jQuery(\u0027.text_slider_goto3\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  2);});jQuery(\u0027.text_slider_goto4\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  3);});var  resize_16617  =  jQuery(\u0027.owl-carousel\u0027);resize_16617.on(\u0027initialized.owl.carousel\u0027,  function(e)  {if  (typeof(Event)  === \u0027function\u0027)  {window.dispatchEvent(new  Event(\u0027resize\u0027));}  else  {var  evt  =  window.document.createEvent(\u0027UIEvents\u0027);evt.initUIEvent(\u0027resize\u0027,  true,  false,  window,  0);window.dispatchEvent(evt);}});});\u003c/script\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0022slides-tab\u0022 class=\u0022clearfix eael-tab-content-item \u0022 data-title-link=\u0022slides-tab\u0022\u003e\u003cp\u003e\u003cdiv class=\u0027white\u0027 style=\u0027background:rgba(0,0,0,0); 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