Technical analysis I

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3. What technical analysis is not

Technical analysis is not a guaranteed way of predicting share prices. If it was, everybody would use it, and if everybody used it, it wouldn't work anyway.

At best, technical analysis will provide you with a mixed bag of results. Sometimes the technical indicators will come good, and you will make money; at other times, the share price will move in the opposite direction and you will lose.

Expect to win some and lose some. Don't search for the 'perfect system'. It doesn't exist.

Experienced technical analysts recognise that its effectiveness depends partly on factors under their control -

• knowledge of technical indicators
• ability to interpret a chart
• trading skill
• discipline

- and partly on factors outside their control:

• changes in market sentiment about a market sector
• release of macro-economic data which affects the whole market
• changes in a company's fundamentals
• the unknown

Perhaps the most pervasive of these is the last. Sometimes you might identify what looks like a clear signal from the charts, then find that the share price moves against you for no apparent reason. You may never find out why. That's when you need to hold your nerve and not tear up the entire technical analysis rulebook.

Technical analysis is as much art as science.

1. What is technical analysis? 2. Technical analysis compared to fundamental analysis 3. What technical analysis is not 4. Dow Theory 5. Price data 6. Volume data 7. Line charts 8. Bar charts 9. Volume charts 10. Point and figure charts 11. Other types of chart 12. Trends - the basics 13. Simple trend lines 14. Making money from trend lines 15. Trend channels 16. Support and Resistance 17. Breakouts 18. Is technical analysis for you? 19. Software for technical analysis 20. Conclusion

• Technical Analysis
• Technical Analysis Plain and Simple
• Technical Analysis of the Financial Markets
• Martin Pring's Introduction to Technical Analysis