The Basics of Technical Analysis is the first part of this four part series on Forex trading. Technical analysis is simply a method used to analyze and predict the price movements of securities through the use of charting, trends, price patterns and various other technical indicators. Unlike fundamental analysis, technical analysis relies primarily on signal to identify trading opportunities and determine good investments. When looking at technical analysis you should keep in mind that technical analysis and price patterns are two separate things. They are not to be confused with each other.
In a fundamental analysis you would look at how the overall market is performing and make some general assumptions about that market. You would then look at what the individual factors are that are influencing that performance and make your own educated guesses as to what those factors might be. These general observations would form the basis of your technical analysis. If you had a clear picture of how the market was doing you could then examine it using various tools such as the Indicator suite or the Macrodyl charts. If you had a clear picture of the market you would be able to tell if there were any significant changes going on, and if so, how they were affecting the trends and the overall market. Of course you could use the fundamentals as well to make educated guesses about what the factors might be, but chances are that you will have a lot more success using the Indicator Suite as you can examine the indicators and see the big picture without having to rely on the words of the analysts.
One of the main tools that you will use in your technical analysis is the chart. This chart is your best friend when you are trying to make sense of the different indicators and historical trends. There are basically four different types of charts used in technical analysis. The first type is the Historical Chart. This is the most basic form of technical analysis, and it looks at the patterns in the past rather than looking to what the current changes might be.
The next type is the Technical Analysis Technical Report, which gives more information about why the current trend exists and what to expect in the future. The next tool in the set of tools for technical analysis is called The Volume Indicator. This uses the concept of demand and supply to determine the health of an investment. This is one of the easier ways to understand what the indicators mean.
The third tool in your technical analysis toolbox is called The RSI History. This is used to determine which securities are climbing and which ones are falling. It uses the SMA, or Simple Moving Average, to give a good picture of the recent trends. Finally, there is The Moving Average Convergence Divergence, which uses the MACD to show the moving averages of the previous two periods and helps investors see where the bulk of the current trading price change has come from. These are all valuable indicators that can be used to help investors decide when to get into or get out of a given investment.
Top-down approaches to technical analysis also exist, and they use the idea of the technical analysis chart. These charts use the moving averages to show the trends in the past, as well as the volume of securities being traded. To many investors, this is the best way to decide which securities to get into or sell. There are many advantages to this approach including the ability to look at longer-term data as well as the ability to analyze trends over longer time periods.
One of the biggest drawbacks to this method is that it can become quite confusing looking at the different charts and patterns. The key to making these types of charts work is to look at the basic concepts and understand how they all work. The concept is that the patterns will tell you whether a security has a strong resistance or support level, for instance. If a security has strong resistance levels, then it will be more difficult to make a profit as the price will need to overcome that resistance before selling off.
On the flip side, if there are no clear patterns or signals from the charts, then a security with very little resistance may have the potential to go up as the market begins to move in one direction or another. If you really want to become an expert at using technical analysis in the stock market, then you need to learn to develop your own chart patterns and signals that you can trust. As you become better acquainted with the concepts, you will begin to see the patterns and signals in the market more. You’ll soon be able to determine when to get in and when to get out of a particular security or market.