103-01 Using Technical Analysis

What is technical analysis?

Stock Market Technical Analysis is the study of supply and demand in the stock market by comparing the history of stock price movements & volume.

The science/art of technical analysis usually fall into different areas of study:

Supply & Demand.  This entails the study of stock price movement vs. volume.  Volume is the number of shares traded in a day; this gives us insights into supply and demand when used in conjunction with the stock price movement.

Trend Following.  Understanding what a stock’s price trend is and what direction it may move.

Waves & Cycle Analysis.  Understanding how markets move and what external factors impact the movement

Stock Charts.  Plotting stock prices and volume in charts to visualize and understand the stock or market index history.  The use of Bars, Candlesticks, or OHLC charts is common.

Trend Interpretation.  Drawing trend lines or support and resistance lines allows us to chart the direction of a stock.

Price Indicators.  The study of price-based chart indicators or oscillators known as Stochastics, Relative Strength Index (RSI), Rate of Change (ROC), Moving Averages (MA), Moving Average Convergence Divergence (MACD), Parabolic SAR, and the Average Direction Movement Index (ADX).

Study of Volume.  Understanding how the volume level has a relationship with price – and how price has a relationship with volume.

Study of Price Volume Indicators.  Indicators that combine price and volume can be very effective.  Typical indicators are On Balance Volume (OBV), Chaikin Money Flow (CMF), Time Segmented Volume (TSV), and MoneyStream (MS).

Market Sentiment.  Market sentiment is understanding the madness of crowds and the overall level of fear and greed in the market.

Positives

If taught correctly, technical analysis can help you understand one side of the stock market equation.  This is the “effect” part of the cause and effect equation.

Technical Analysis Studies the:

  • What – What has just happened
  • Effect – The effect of market action, not the cause
  • Market action – what is happening in real-time at the moment
  • The price
  • The volume – supply and demand
  • The trends

Negatives

Using only technical analysis may cause people to oversimplify the market.  It is very worthwhile to learn how to fundamentally assess a company’s fundamentals and view the technical situation in the charts.

In this training course, you will become proficient in these areas.

Learn Stock Market Investing & Trading Course – LST Pro

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