Technical Analysis

Page 1

Part One

Defining Technical Analysis

The study of securities price behaviour and how to exploit them to make money and avoid loss.

ACTIVE - NON SAVING VEHICLE

TRADER

Use Technical Analysis

Holds securities for minutes to months

Seeks income from commissions

INVESTOR

Use Technical Analysis

Holds securities for months to years.

Seeks income from dividends

VS

Side Note: Blue Widget Stock

Niche word for stocks

TA - has the tools to help identify market situations

Side Note: Risk management is important as to have exit plan is just as.

Bear/ish market is going down

Bull/ish Market is going up

Market Trends can last for a long period of time. Knowing the trend is very important

Side Note: If you are unable to see the trend extend the chart to a month or even year.

When prices rise this is called uptrend

When prices fall this is called downtrend

Fundamental Analysis: The study of finding true price of a security.

Fundamental Analysis is compatible with Technical Analysis.

Securities move in trends most of the time.

Trends can be identified by patterns seen repeatable and through support and resistance trend-lines

Primary Trends can last years which are punctuated by Secondary movements that may last months or weeks. This movement is usually in the opposite direction of the primary trend. Called retracements

Two Types of trends, up and down

pg15

Breakout: When a price breaks a support or resistance line.

They are a powerful instrument, but not always correct

Charting: Reading into Supply and Demand

Market Timing: Reading into timing of the markets. Sentiment indicators and Calender Effects

Trend Following: First thing you look for in a chart

Discovering the essence

of Market Movement

Technical Analysis focuses more on the price than fundamental analysis

The market or know as "the crowd" sets the markets prices

The market may be rational or irrational but the market is always right

securities are subjected to standard laws of supply and demand

Pg: 23

Price Discovery can take time

The process where by supplies and buyers find the right price which are both acceptable to both parties

Laws of supply and Demand: States that demand for the product sets the price.

Higher and higher prices demand falls off.

Higher demand means bigger supply, means lowering of the price

http://www.youtube.com/watch?v=6Q_XxwqtwxY (Embed)

http://www.youtube.com/watch?v=Zl4fmEoyyw4 (Embed)

Momentum Investing

https://www.youtube.com/watch?v=NGoSHIB-RhM (Embed)

Reversion to the mean or Mean Reversion: Is the return to the normal price range.

Deviation

Chapter One

Chapter Two