A Brief Guide on Technical Analysis and the Tools You Can Use

A Brief Guide on Technical Analysis and the Tools You Can Use – Introduction 

Technical analysis is one of the three types of analysis that traders use to make decisions. The other two are fundamental and sentimental analysis. Technical analysis involves the use of technical indicators to make forecasts on how the asset price will move. This article will look at the types of indicators and how you can succeed as a technician.

Trend indicators

The core of trading and investing is to find a trend and follow it to the end. When you find a trend that is moving upwards, the goal is to buy and when you find a trend that is moving downwards, the goal is to sell. Trend indicators are used to show when a new trend is forming and when it is coming to an end. Examples of trend indicators are:

  • Parabolic SAR
  • Moving Averages
  • Average Directional Index
  • Standard Deviation
  • Ichimoku Kinko Hyo
  • Envelopes

Oscillators

Oscillators are indicators that are used to show the extremes of the trends. They are mostly known as indicators of oversold and overbought positions. Examples of these types of indicators are:

  • MACD
  • Relative Strength Index
  • Stochastics
  • Bulls and Bears Power
  • DeMarker
  • Relative Vigor Index
  • Momentum

Volumes

Wise traders don’t focus on oscillators and trend indicators alone. Those who focus on these alone often find themselves making the wrong decision. Instead, the ideal process is to incorporate the concept of volumes in the analysis. The volumes show the activity of the other investors in the market. For example, the trend and volumes indicator can reveal a bullish trend but at a low volume environment. If this happens, it could be a false breakout. If the volume is high, it means that more investors are following the trend. Examples of these indicators are:

  • Accumulation and distribution
  • Money Flow Index
  • Volumes
  • On Balance Volume

Other Indicators

There are other indicators that are not in either of the classification but ones that help the traders make decisions. These include: Fractals, Heiken Ashi, and iExposure among others.

Other Tools

Apart from these indicators, there are other tools that will help you improve your technical analysis skills. These are known as charting tools because they give you an indication of where the price of an asset will move next. Examples of these are the Fibonacci Retracement, Gann line and grid, and linear regression.

Another important aspect in technical analysis is the candlestick patterns. It is almost impossible to be successful in this analysis if you don’t know how to interpret the candlestick patterns. Examples of the most popular patterns are:

  • Three Line Strikes
  • Two black gapping
  • Three black cows
  • Evening and morning stars
  • Abandoned baby
  • Doji
  • Hammer reversal

All these technical tools were created using complex mathematical formulas but fortunately, you don’t need to calculate them yourselves. Instead, all you need to do is to apply them in the charts provided by DTTW. In addition, you don’t need to master all the indicators. You just need to master a few and then learn how you can use them in doing the analysis.

A Brief Guide on Technical Analysis and the Tools You Can Use – UsefulTips

Learn How to Trade, Trade Like a Pro & Make Money with DTTW

With DTTW's Technology, Trading Capital, and Risk-Management system, you can make money in day trading while managing your own business.

Accepted Payment Methods:

Payments accepted from DTTW™

Your ability to open a DTTW trading office or join one of our trading offices is subject to the laws and regulations in force in your jurisdiction. Due to current legal and regulatory requirements, United States citizens or residents are kindly asked to leave this website.

© 1997-2019 Day Trade The World™ All rights reserved.

Day Trade the World™ is a registered trademark of Select Vantage Canada Inc. 

Privacy PolicySitemap.

FEATURED DOWNLOAD:

Business Proposal eBook

  • Monthly profits (P&L) of our best partners
  • Detailed startup costs
  • Detailed ongoing costs
Download now ›
close-link