Accendo Traders Video Technical Analysis Trading Plans

Introduction to Technical Analysis

Someone who plans on going into trading in the market has a wealth of information that they can use to make their decisions about jumping in and out of positions. Technical analysis is one of the more utilized tools of successful traders. Although some question the ability of using this type of analysis to correctly make analysis of market conditions consistently, the tools available in technical analysis can help your portfolio grow over time if analyzed and used properly.

Technical analysis is forecasting of future market price development by looking for patterns within a stock’s past performance. It is a method of evaluating stocks by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic or actual value, but instead use charts and other tools to identify patterns that can suggest future activity. Normally technical analysts follows three axioms:

1:- Market movement considers everything
check all that factors which influences the price of securities, whether economic, political, or psychological, has already been taken into account and reflected in the price chart. Technical analyst, however, makes her/his conclusions in the opposite sequence: since the price has grown, it means the demand is higher than the supply and vice-versa.

2:-The prices move with the trend

3:-The history repeats itself

Technical Analysis vs. Fundamental Analysis

In a shopping mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, his or her decision would be based on the patterns or activity of people going into each store.

Technical Indicators

A technical indicator offers a different perspective from which to analyze the price action. Some, such as moving averages, are derived from simple formulas and the mechanics are relatively easy to understand. Others, such as Stochastics, have complex formulas and require more study to fully understand and appreciate. Regardless of the complexity of the formula, technical indicators can provide unique perspective on the strength and direction of the underlying price action.

Why Use Technical Indicators

According to Stockcharts.com, Technical Indicators serve three broad functions: to alert, to confirm and to predict.

• An indicator can act as an alert to study price action a little more closely. If momentum is waning, it may be a signal to watch for a break of support. Or, if there is a large positive divergence building, it may serve as an alert to watch for a resistance breakout.
• Indicators can be used to confirm other technical analysis tools. If there is a breakout on the price chart, a corresponding moving average crossover could serve to confirm the breakout. Or, if a stock breaks support, a corresponding low in the On-Balance-Volume (OBV) could serve to confirm the weakness.
• Some investors and traders use indicators to predict the direction of future prices.

The stock market is diverse. Thus, there is no one indicator that works for every stock all of the time. Usually you will find Stock A works with indicator B while Stock B works well with Indicator C. You have to develop a basket of technical indicators that are comfortable with utilizing as a part of your trade plan. As your indicators begin to align or confirm one another, you can begin to gage the validity of a stock’s current trend. Some of my favourite indicators are: RSI, Stochastics, MACD, ADX, Moving Averages, and Support and Resistance.

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Tags: Axioms, Bench, Conclusions, Decisions, Different Perspective, Fundamental Analysis, Future Market, Intrinsic Value, Introduction To Technical Analysis, Shopping Mall, Sit, Statistics, Stock, Stocks, Successful Traders, Technical Analyst, Technical Analysts, Technical Help, Technical Indicator, technical indicators, Tools

This entry was posted on Tuesday, September 23rd, 2008 at 5:01 pm and is filed under technical analysis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response.