Click to buy
|
Click to buy |
This outstanding reference has already taught thousands of traders the concepts of technical analysis and their application in the futures and stock markets. Covering the latest developments in computer technology, technical tools, and indicators, the second edition features new material on candlestick charting, inter market relationships, stocks and stock rotation, plus state-of-the-art examples and figures. From how to read charts to understanding indicators and the crucial role technical analysis plays in investing, readers gain a thorough and accessible overview of the field of technical analysis, with a special emphasis on futures markets. Revised and expanded for the demands of today's financial world, this book is essential reading for anyone interested in tracking and analyzing market behavior. |
Technical Analysis or (TA) sounds more intimidating than it really is. The theory is that price movement is repetitive and follows standard patterns, and future price movement can be predicted by these patterns due to investor psychology. Pure TA traders aren't interested in the fundamentals of a company, just what the chart is saying. This is because a company with good fundamentals, may not be recognized and rewarded by Wall Street due to investor psychology. Technical Analysis takes investor psychology into account. Statements like "the trend is your friend" is purely from a Technical Analysis point of view. The purpose of Technical Analysis is to predict the future movement of a stock based on its past performance. There are many, "random walkers", who believe the stock market is random and that TA doesn't work. Others will argue that they are a self fulfilling prophesy. All Technical Analysis systems have indicators of when to buy and sell. The simplest system of Technical Analysis is support and resistance. The theory is that stocks will usually not go below a lower price (support) and above a higher price (resistance). Some traders use 50 day and 200 day moving average (MA) for this. We recommend purchasing the book The Visual Investor by John J. Murphy for the best description of Technical analysis we've seen to date.
We believe that Technical Analysis and Fundament Analysis are basically the same thing. Techniques to predict the future performance of a stock. Whether a stock is above it's 200 day moving average or the price to sales ratio is 1, how would using these indicators perform in the past. We've been codifying some of these rules into our Backtester software. You can see it's picks here which are based purely on technical indicators.
Support
and Resistance - is a technical analysis indicator that
looks for highs and lows that a stock has trouble breaking above
or below.
Volume - is one of the key indicator in technical analysis
Investor
Business Daily has excellent volume analysis on a daily basis.
Volume rising with price increase and decreasing with price decreases
are positive technical signs.
Moving Averages, take the average price of a stock over
a number of days, 10, 21, 50 and 200 day are very common ones.
These averages, smooth the graph of a stock to help eliminate
short term movements.
Exponential Moving Averages (EMA) give a greater weight
to more recent prices.
MACD - Moving Average Convergence Divergence
Back testing. - back testing is the science of examining
how a technical indicator or trading strategy has performed historically.
At a minimum the strategy should beat a buy and hold strategy.
See our Backtester software stock picks here.
Books