How To Use Technical Analysis In Trading
When it comes to stock trading, there are basically two schools of thought. Some traders swear by fundamental analysis and others are of the opinion that technical analysis is the only way to predict market movements.
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.
Since you find traders who consistently make money in both camps, it's logical to conclude that both approaches could be successful if applied systematically over a period of time.
The tools of the technical analyst mostly consist of charts depicting variations in various technical indicators. There are a couple of chart types favored by different traders. A few of the most popular are: candlestick charts, line charts and OHLC charts (Open High Low Close).
The technical indicators depicted by these charts can be grouped broadly into four categories: Momentum indicators, trend indicators, volume indicators and volatility 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.
Volatility indicators, such as the ATR (Average True Range), depict 'normal' price ranges graphically, so that a trader can easily see when the price breaks out of this normal range - which might indicate a major price movement.
Volume indicators show trading volumes in a particular period. High volumes combined with a price movement is a strong indication that the market feels strongly about that particular 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. - 23204
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.
Since you find traders who consistently make money in both camps, it's logical to conclude that both approaches could be successful if applied systematically over a period of time.
The tools of the technical analyst mostly consist of charts depicting variations in various technical indicators. There are a couple of chart types favored by different traders. A few of the most popular are: candlestick charts, line charts and OHLC charts (Open High Low Close).
The technical indicators depicted by these charts can be grouped broadly into four categories: Momentum indicators, trend indicators, volume indicators and volatility 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.
Volatility indicators, such as the ATR (Average True Range), depict 'normal' price ranges graphically, so that a trader can easily see when the price breaks out of this normal range - which might indicate a major price movement.
Volume indicators show trading volumes in a particular period. High volumes combined with a price movement is a strong indication that the market feels strongly about that particular 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. - 23204
posted by X - Men @ 2:37 AM
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