Technical analysis I

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1. What is technical analysis?

The successful technical analyst buys and sells on the basis of his preferred technical indicators and by reference to the price chart, and hopes to make a profit when the share price fulfils his predictions.

Underpinning technical analysis are three core principles:

1. Share prices move in patterns
2. Patterns repeat themselves
3. If you anticipate a pattern correctly, you can profit from it

Different technical analysts use different techniques, but for the most part they rely on the same raw data:

• Price (whether share prices, commodity prices or option prices)
• Volume (the number of shares or other instrument traded per day)

Using historical data of these two variables, the analyst creates a chart (usually on a computer using special software), identifies patterns, and trades on the basis of what they tell him.

• If a trend indicates that the price of a share is due to go up, he buys shares or call options
• If a trend indicates that the price of a share is due to go down, he sells shares or buys put options

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

• An Introduction to Technical Analysis - Reuters Financial Training Series
• Technical Analysis of the Financial Markets
• Martin Pring's Introduction to Technical Analysis