How To Use Technical Analysis
There are two major schools of thought among stock traders: one group strongly believes fundamental analysis is the only way to predict future price movements of a market instrument, while the second group is of the opinion that the best way is to use technical analysis.
The latter basically involves that you study past behavior in prices and trading volumes of a market instrument and then use that information to extrapolate future movements. The underlying assumption is that the past will repeat itself in the future, given the same set of circumstances. Proponents of fundamental analysis believe that this is not possible. Market conditions will never be exactly the same, so there is no way to use the past to predict the future.
You will find successful traders in both camps. This seems to indicate that both approaches could indeed work if applied consistently.
Charts form the main arsenal of the technical analyst. These charts are used to portray changes in a large number of so-called technical indicators. The most popular chart types used by traders are: OHLC (Open High Low Close) charts, line charts and candlestick charts.
The data that is presented graphically fall into a number of categories. Examples of these are trend indicators, momentum indicators, volatility indicators and volume indicators.
Volatility indicators, an example of which is the ATR (average true range), show when the price of a market instrument moves out of its normal trading range. Many traders keep a tab on this, since it often happens at the start of a strong price movement either up or downwards.
A few of the most popular trend indicators are MACD and the Parabolic SAR indicator. Many indicators believe in always trading with the trend and if you are one of them, you will find this type of indicator very useful.
Two of the trend indicators most favored by traders are the Parabolic SAR and the MACD. This type of indicator try to determine whether a market trend that is likely to continue for some time has been firmly established.
Volatility indicators, for example the ATR, portray the 'normal' ranges in which prices move graphically. That makes it easy to pick up when the price breaks out of this range - which could suggest a strong price movement.
If you are new to trading, it is strongly recommended that you familiarize yourself with the inner workings of the various technical analysis tools that are available to traders. - 23167
The latter basically involves that you study past behavior in prices and trading volumes of a market instrument and then use that information to extrapolate future movements. The underlying assumption is that the past will repeat itself in the future, given the same set of circumstances. Proponents of fundamental analysis believe that this is not possible. Market conditions will never be exactly the same, so there is no way to use the past to predict the future.
You will find successful traders in both camps. This seems to indicate that both approaches could indeed work if applied consistently.
Charts form the main arsenal of the technical analyst. These charts are used to portray changes in a large number of so-called technical indicators. The most popular chart types used by traders are: OHLC (Open High Low Close) charts, line charts and candlestick charts.
The data that is presented graphically fall into a number of categories. Examples of these are trend indicators, momentum indicators, volatility indicators and volume indicators.
Volatility indicators, an example of which is the ATR (average true range), show when the price of a market instrument moves out of its normal trading range. Many traders keep a tab on this, since it often happens at the start of a strong price movement either up or downwards.
A few of the most popular trend indicators are MACD and the Parabolic SAR indicator. Many indicators believe in always trading with the trend and if you are one of them, you will find this type of indicator very useful.
Two of the trend indicators most favored by traders are the Parabolic SAR and the MACD. This type of indicator try to determine whether a market trend that is likely to continue for some time has been firmly established.
Volatility indicators, for example the ATR, portray the 'normal' ranges in which prices move graphically. That makes it easy to pick up when the price breaks out of this range - which could suggest a strong price movement.
If you are new to trading, it is strongly recommended that you familiarize yourself with the inner workings of the various technical analysis tools that are available to traders. - 23167
posted by X - Men @ 5:24 AM
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