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Technical Analysis ModuleNATIONAL STOCK EXCHANGE OF INDIA LIMITED

Test Details:Sr.No.Name of ModuleFees(Rs.)Test Duration(in minutes)No. ofQuestionsMaximumMarksPassMarks (%)CertificateValidity51Financial Markets: A Beginners’ Module *168612060100502Mutual Funds : A Beginners' Module1686120601005053Currency Derivatives: A Beginner’s Module1686120601005054Equity Derivatives: A Beginner’s Module1686120601005055Interest Rate Derivatives: A Beginner’s Module1686120601005056Commercial Banking in India: A Beginner’s Module1686120601005057Securities Market (Basic) Module1686120601006058Capital Market (Dealers) Module *1686105601005059Derivatives Market (Dealers) Module * [Please refer to footnote no. (i) ]16861206010060310FIMMDA-NSE Debt Market (Basic) Module16861206010060511Investment Analysis and Portfolio Management Module16861206010060512Fundamental Analysis Module16861206010060513Financial Markets (Advanced) Module16861206010060514Securities Markets (Advanced) Module16861206010060515Mutual Funds (Advanced) Module16861206010060516Banking Sector Module16861206010060517Insurance Module16861206010060518Macroeconomics for Financial Markets Module16861206010060519Mergers and Acquisitions Module16861206010060520Back Office Operations Module16861206010060521Wealth Management Module16861206010060522NISM-Series-I: Currency Derivatives Certification Examination100012010010060323NISM-Series-II-A: Registrars to an Issue and Share Transfer Agents –Corporate Certification ExaminationNISM-Series-II-B: Registrars to an Issue and Share Transfer Agents –Mutual Fund Certification M-Series-IV: Interest Rate Derivatives Certification Examination100012010010060326NISM-Series-V-A: Mutual Fund Distributors Certification Examination *100012010010050327NISM-Series-VI: Depository Operations Certification M Series VII: Securities Operations and Risk ManagementCertification ExaminationNISM-Series-VIII: Equity Derivatives Certification Examination100012010010060330Certified Personal Financial Advisor (CPFA) Examination44951208010060331NSDL–Depository Operations Module1686756010060 #532Commodities Market Module20221206010050333Surveillance in Stock Exchanges Module16861205010060534Corporate Governance Module16869010010060535Compliance Officers (Brokers) Module16861206010060536Compliance Officers (Corporates) Module16861206010060537Information Security Auditors Module (Part-1)Information Security Auditors Module (Part-2)2528252812012090901001006060238Options Trading Strategies Module16861206010060539Options Trading (Advanced) Module16861203510060540FPSB India Exam 1 to 4**2247 perexam1207514060NA41Examination 5/Advanced Financial Planning **56182403010050NA42Equity Research Module ##16861206510055243Issue Management Module ##16861208010055244Market Risk Module ##16861205010055245Financial Modeling Module ###11231203010050NA46Financial Services Foundation Module ###11231204510050NA*#**Candidates have the option to take the tests in English, Gujarati or Hindi languages.Candidates securing 80% or more marks in NSDL-Depository Operations Module ONLY will be certified as ‘Trainers’.Following are the modules of Financial Planning Standards Board India (Certified Financial Planner Certification)FPSB India Exam 1 to 4 i.e. (i) Risk Analysis & Insurance Planning (ii) Retirement Planning & Employee Benefits (iii) InvestmentPlanning and (iv) Tax Planning & Estate PlanningExamination 5/Advanced Financial Planning## Modules of Finitiatives Learning India Pvt. Ltd. (FLIP)### Module of IMS ProschoolThe curriculum for each of the modules (except Modules of Financial Planning Standards Board India, Finitiatives Learning India Pvt. Ltd. andIMS Proschool) is available on our website: www.nseindia.com Education Certifications.Note: (i) NISM has specified the NISM-Series-VIII-Equity Derivatives Certification Examination as the requisite standard for associated personsfunctioning as approved users and sales personnel of the trading member of an equity derivatives exchange or equity derivative segment of arecognized stock exchange.

ContentsCHAPTER 1 . 9INTRODUCTION TO TECHNICAL ANALYSIS . 91.1What is technical analysis?.91.1.1Price discounts everything .91.1.2Price movements are not totally random . 101.1.3Technical Analysis: the basic assumption . 111.1.4Strengths and weakness of technical analysis . 121.1.4.1Importance of technical analysis. 121.1.4.2Weaknesses of technical analysis . 13CHAPTER 2 . 16CANDLE CHARTS . 162.1The charts . 162.2Candlestick analysis . 202.2.12.2.22.2.3One candle pattern. 212.2.1.1Hammer . 212.2.1.2Hanging man . 222.2.1.3Shooting star and inverted hammer . 23Two candle pattern . 262.2.2.1Bullish engulfing. 262.2.2.2Bearish engulfing . 282.2.2.3Piercing . 292.2.2.4Bearish harami. 312.2.2.5Bullish harami . 33Three candle pattern . 352.2.3.1Evening star . 352.2.3.2Morning star . 382.2.3.3Doji . 40CHAPTER 3 . 46PATTERN STUDY . 463.1What are support and resistance lines? . 463.1.1Support. 463.1.2Resistance . 483.1.3Why do support and resistance lines occurs?. 493.1.4Support and resistance zone . 493.1.5Change of support to resistance and vice versa . 513

3.1.63.23.33.4Why are support and resistance lines important? . 52Head and shoulders . 523.2.1Head and shoulders top reversal . 533.2.2Inverted head and shoulders . 573.2.3Head and shoulders bottom . 58Double top and double bottom . 623.3.1Double top . 633.3.2Double bottom. 663.3.3Rounded top and bottom . 69Gap theory . 703.4.1Common gaps . 713.4.2Breakaway gaps. 713.4.3Runaway/continuation gap . 723.4.4Exhaustion gap . 733.4.5Island cluster . 74CHAPTER 4 . 79MAJOR INDICATORS & OSCILLATORS . 794.14.24.3What does a technical indicator offer? . 794.1.1Why use indicator? . 794.1.2Tips for using indicators . 794.1.3Types of indicators . 804.1.4Simple moving average. 814.1.5Exponential moving average . 814.1.6Which is better? . 83Trend following indicator . 844.2.1When to use? . 844.2.2Moving average settings . 844.2.3Uses of moving average . 854.2.4Signals - moving average price crossover . 874.2.5Signals - multiple moving averages . 88Oscillators . 894.3.1Relative strength index . 894.3.1.1What is momentum? . 894.3.1.2Applications of RSI . 904.3.1.3Overbought and oversold . 904.3.1.4Divergence . 914.3.1.5Stochastic . 934

4.3.24.44.3.1.6William %R . 974.3.1.7Real life problems in use of RSI . 994.3.1.8Advanced concepts . 99Moving average convergence/divergence(MACD) . 1024.3.2.1What is the macd and how is it calculated . 1024.3.2.2MACD benefits . 1034.3.2.3uses of MACD . 1044.3.2.4Money Flow Index . 1074.3.2.5Bollinger Bands . 109Using multiple indicators for trading signals. 1104.4.1Price sensitive techniques. 1104.4.2Volume sensitive techniques . 1114.4.3Composite methods . 1114.4.4How to use tool kit of trading techniques . 1114.4.5Trading market tool kit applications . 1124.4.6Bull market tool kit application . 1124.4.7Bear market tool kit application. 1124.4.8Trading market changing to bull market tool kit application . 1134.4.9Trading market changing to bear market tool kit application . 1134.4.10 Bull market changing to trading market tool kit application . 1144.4.11 Bear market changing to trading market tool kit application . 114Chapter 5 . 120Trading Strategies . 1205.15.2day trading . 1205.1.1advantages of day trading . 1205.1.2risks associated with risk trading . 121strategies . 1235.2.1strategies for day trading . 1235.2.2momentum trading strategies . 123Chapter 6 . 127Dow Theory and Elliott Wave Theory . 1276.1Introduction . 1276.2Principles of Dow Theory . 1276.3Significance of Dow Theory . 1336.4Problems with Dow Theory . 1336.5Elliot Wave . 1336.5.1Introduction . 1336.5.2Fundamental Concept . 1335

6.5.3After Elliott. 149Chapter 7 . 159Trading psychology and risk management . 1597.1Introduction . 1597.2Risk Management . 1607.2.1Components of risk management . 1617.2.1.1Stop loss . 1617.2.1.2Analyze reward risk ratio . 1617.2.1.3Trail stop loss. 1617.2.1.4Booking Profit . 1617.2.1.5uses of stop loss . 1617.2.1.6qualities of successful traders . 1617.2.1.7golden rules of traders . 1627.2.1.8do’s and don’ts in trading . 1627.3rules to stop losing money . 1637.4choosing the right market to trade . 1677.4.1importance of discipline in trading . 1676

Distribution of weights in theTechnical Analysis Module CurriculumChapterNo.TitleWeightages1INTRODUCTION TO TECHNICAL ANALYSIS122CANDLE CHARTS133PATTERN STUDY204MAJOR INDICATORS & OSCILLATORS205TRADING STRATEGIES126DOW THEORY AND ELLIOT WAVE THEORY127TRADING PSYCHOLOGY AND RISK MANAGEMENT11Total100Note: Candidates are advised to refer to NSE’s website: www.nseindia.com, click on ‘Education’link and then go to ‘Updates & Announcements’ link, regarding revisions/updations in NCFMmodules or launch of new modules, if any.Copyright 2013 by National Stock Exchange of India Ltd. (NSE)Exchange Plaza, BandraKurla Complex,Bandra (East), Mumbai 400 051 INDIAAll content included in this book, such as text, graphics, logos, images, data compilation etc.are the property of NSE. This book or any part thereof should not be copied, reproduced,duplicated, sold, resold or exploited for any commercial purposes. Furthermore, the book inits entirety or any part cannot be stored in a retrieval system or transmitted in any form or byany means, electronic, mechanical, photocopying, recording or otherwise.7

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CHAPTER 1INTRODUCTION TO TECHNICALANALYSISLearning objectivesAfter studying this chapter the student should be able to understand: The basis of technical analysis The strengths and weaknesses of technical analysis1.1What is Technical Analysis?Technical Analysis can be defined as an art and science of forecasting future prices based onan examination of the past price movements. Technical analysis is not astrology for predictingprices. Technical analysis is based on analyzing current demand-supply of commodities,stocks, indices, futures or any tradable instrument.Technical analysis involve putting stock information like prices, volumes and open intereston a chart and applying various patterns and indicators to it in order to assess the futureprice movements. The time frame in which technical analysis is applied may range fromintraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weeklyor monthly price data to many years.There are essentially two methods of analyzing investment opportunities in the securitymarket viz fundamental analysis and technical analysis. You can use fundamental informationlike financial and non-financial aspects of the company or technical information which ignoresfundamentals and focuses on actual price movements.The basis of Technical AnalysisWhat makes Technical Analysis an effective tool to analyze price behavior is explained byfollowing theories given by Charles Dow: Price discounts everything Price movements are not totally random What is more important than why1.1.1Price discounts everything“Each price represents a momentary consensus of value of all market participants – largecommercial interests and small speculators, fundamental researchers, technicians andgamblers- at the moment of transaction” – Dr Alexander Elder9

Technical analysts believe that the current price fully reflects all the possible materialinformation which could affect the price. The market price reflects the sum knowledge

• The basis of technical analysis • The strengths and weaknesses of technical analysis 1.1 What is Technical Analysis? Technical Analysis can be defi ned as an art and science of forecasting future prices based on an examination of the past price movements. Technical analysis is not astrology for predicting