Module 1. An Intro to Technical Analysis

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Technical Analysis is a method of evaluating all financial securities by analysing historical financial charts.  Analysts analyse such things as price action and chart patterns using technical indicators to predict where prices will go in the future.  On the surface this sounds mechanical, but once we drill down into TA we'll find that these technicians are also predicting market sentiment and the psychological state of the markets.  All the big investment houses use technicians as part of their trading strategies and many home traders will use these techniques for extra income, investing or even earning a living. 

This Module forms the backbone of the whole course, allowing you to build a framework to develop your own trading strategies.  We'll discover the basic building blocks of Technical Analysis (TA) that shouldn't be ignored.   First we'll look at the main market assumptions created by Charles Dow (founder of Dow Jones and "developer" of TA) in 1900 and look at the fundamentals of charting.  We'll go on to discover the importance of studying charts in different time frames, the significance of trend and how to spot it.  Finally looking at how volume plays it's part, why support and resistance levels in financial markets can't be ignored and what causes these important levels.  

What is Technical Analysis

Technical analysis is based on three important assumptions about market events. First, prices discount all information available to the public. Secondly, price movements are not random, and that technical tools can be used to establish the underlying currents behind the price action. Third, price trends tend to repeat themselves. In other words, past developments provide some guidance on the direction and magnitude of future price action. So, technical analysis regards the price action as the conscious activity of a mass acting collectively.  In other words, just like the case with a beehive, the seemingly independent actions of individual traders are targeted toward achieving the most sensible and logical course for prices in general.

And there lies the basis of technical analysis. Just as we deduce that a person who takes out keys from his pockets is intent on opening the door, we expect that a certain spike or collapse in prices, a period of trending activity, or consolidation must lead to their logical conclusion in the markets in breakouts, or successive highs or lows, the nature of which is determined by technical analysis.

Advantages of Technical Analysis

Technical analysis is simple and straightforward, with tools available to every one from the seasoned hedge fund manager, to the novice retail trader. In addition, technical tools are easier to interpret than fundamental indicators, the understanding of which usually requires a period of diligent study. Finally, since technical analysis focuses on the price action exclusively, the technical trader has one needle in his compass: the price, on which any calculation about profits or losses must be based.

Technical studies have been refined and perfected over the years, and by using them we are making use of the heritage of thousands of experienced and knowledgeable traders who have contributed to the effort. By mastering the various aspects of technical trading, we can also minimize the role of guesswork and conjectures in analyzing the price action.

Contents: 


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Technical Analysis is a method of evaluating all financial securities by analysing historical financial charts.  Analysts analyse such things as price action and chart patterns using technical indicators to predict where prices will go in the future.  On the surface this sounds mechanical, but once we drill down into TA we'll find that these technicians are also predicting market sentiment and the psychological state of the markets.  All the big investment houses use technicians as part of their trading strategies and many home traders will use these techniques for extra income, investing or even earning a living. 

This Module forms the backbone of the whole course, allowing you to build a framework to develop your own trading strategies.  We'll discover the basic building blocks of Technical Analysis (TA) that shouldn't be ignored.   First we'll look at the main market assumptions created by Charles Dow (founder of Dow Jones and "developer" of TA) in 1900 and look at the fundamentals of charting.  We'll go on to discover the importance of studying charts in different time frames, the significance of trend and how to spot it.  Finally looking at how volume plays it's part, why support and resistance levels in financial markets can't be ignored and what causes these important levels.  

What is Technical Analysis

Technical analysis is based on three important assumptions about market events. First, prices discount all information available to the public. Secondly, price movements are not random, and that technical tools can be used to establish the underlying currents behind the price action. Third, price trends tend to repeat themselves. In other words, past developments provide some guidance on the direction and magnitude of future price action. So, technical analysis regards the price action as the conscious activity of a mass acting collectively.  In other words, just like the case with a beehive, the seemingly independent actions of individual traders are targeted toward achieving the most sensible and logical course for prices in general.

And there lies the basis of technical analysis. Just as we deduce that a person who takes out keys from his pockets is intent on opening the door, we expect that a certain spike or collapse in prices, a period of trending activity, or consolidation must lead to their logical conclusion in the markets in breakouts, or successive highs or lows, the nature of which is determined by technical analysis.

Advantages of Technical Analysis

Technical analysis is simple and straightforward, with tools available to every one from the seasoned hedge fund manager, to the novice retail trader. In addition, technical tools are easier to interpret than fundamental indicators, the understanding of which usually requires a period of diligent study. Finally, since technical analysis focuses on the price action exclusively, the technical trader has one needle in his compass: the price, on which any calculation about profits or losses must be based.

Technical studies have been refined and perfected over the years, and by using them we are making use of the heritage of thousands of experienced and knowledgeable traders who have contributed to the effort. By mastering the various aspects of technical trading, we can also minimize the role of guesswork and conjectures in analyzing the price action.

Contents: 


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