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Technical Analysis
What is it? - More details

Charting? Reading tea leaves? or what?

Price charts summarise the underlying opinions and emotions of the market participants.
Every chart tells a story.
It pays to understand the stories in the price charts.
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Related links: Technical Analysis - Getting StartedTechnical Analysis - The Proof; 4 Windows approach
 Dow Theory; Trends and trend-spotting; Support and Resistance; Stop Loss; Chart patterns;
 Fundamental analysis; Funda-Technical Analysis; eBook Articles Master List; eBook Articles INDEX; about eBook Articles

Technical Analysis - a definition

"The interpretation of past share prices
(mostly on share price charts)
to try to gauge likely future price action."

Reading tea leaves?

Some people might think that this is just as good as reading tea leaves. But, there is some very uncanny success in what the charts can tell us. 

Take a look at the 2007 market peak and the warning signs that Technical Analysis gave us of the impending market crash. Or the analysis of recent bull markets and bear markets, and how technical analysis gave us lots of warnings before they hit.

TA - Why use it?

This is a very useful collection of tools to help understand the sentiment that is driving share prices, in anticipation of having a better feel for where share prices might move in the future.

What is Technical Analysis (TA)?

(I will use the acronym TA to abbreviate Technical Analysis here only for convenience and to help with readability and comprehension.)

TA is to do with analysing the various financial markets, to help anticipate likely financial performance.  (But it is not 100% accurate.)

An alternative way to analyse the markets is to use Fundamental Analysis. At the one extreme some people will use pure TA for 100% of their analysis, and others will use 100% Fundamental Analysis. Then there are many people who will utilise a combination of both. Having said that, I won't refer to Fundamental Analysis on this page again.

So, what about just TA?

TA is a very broad field, but is basically the analysis of past "prices" in the hope of forecasting or anticipating future price changes.

For a list of various definitions, see the Google search engine.

What "prices" are we talking about?

The reference to "prices" is a reference to a whole lot of things to which we can apply the study of TA, including the following financial instruments:
  • stocks, equities, shares
  • foreign currencies
  • tradeable share Options and Warrants
  • CFDs (Contracts for Difference)
  • Commodities (eg. oil, gold, pork bellies, etc.)

How do we do this?

We implement TA techniques using price charts of the financial instrument in question.

The best way to do this is to use a quality share price charting tool (computer software), coupled with a reliable and quality data source.

Robert's charting tool of choice is the Australian BullCharts software package.

The field of
Technical Analysis comprises:

The very broad field of TA comprises a number of sub-topics. Some people prefer to follow a limited number of these sub-topics. To be a competent technical analyst there is no requirement to be competent in all of the following.  Just a couple might be enough.

Much of technical analysis is actually based on the teachings and theories of Dow Theory.

  • Primary Analysis
  • Secondary Analysis
    Various indicator types:-
    Trend, Volatility, Momentum, Volume
    Note: some of the items listed below are described in more detail in the eBook (PDF) Articles.
    • Trend indicators:
      • Moving Average
      • Multiple Moving Average (MMA)
      • MACD
      • Parabolic-SAR
      • ADX / DMI
    • Volatility indicators:
      • Bollinger Bands
      • ATR (Average True Range)
      • Envelopes
    • Momentum indicators:
      • Momentum
      • Twiggs Money Flow
      • OBV (On Balance Volume)
      • A/D (Accumulation / Distribution)
      • Price Rate of Change (ROC)
      • RSI (Relative Strength Index)
      • Stochastic
      • CCI (Commodity Channel Index)
      • Coppock
    • Volume indicators:
      • Volume with MA of volume
      • Volume Rate of Change
      • Volume Oscillator
  • Additional Topics:
    • Cycle analysis
    • Fibonacci number sequence (0, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233....)
    • Elliott Wave
    • W.D.Gann 
    • Computational techniques.
  • How to learn more
    about technical analysis?

    Technical Analysis - Getting Started - Robert's suggested steps on how to make progress with learning about Technical Analysis.

    More information

    Funda-Technical AnalysisFunda-Technical Analysis - An investment and trading approach utilising a sensible balance of both Technical Analysis and Fundamental Analysis.

    Brainy's 3Ways RuleBrainy's 3Ways Rule - a smart way to understand trends, and the importance of spotting trends.

    Brainy's extensive list of eBook (PDF) Articles
    on Technical Analysis and other topics.

    Brainy's seminars on Technical Analysis and other topics - click here for details...

    A variety of publications on Technical Analysis and related topics - click here for details...

    ATAA
    Australian Technical Analysts Association

    The ATAA is Australia's pre-eminent not-for-profit organisation regarding technical analysis.
     
    Some of the experienced ATAA members contribute to regular articles in The Age and Sydney Morning Herald newspapers. Scanned copies of these articles are available for perusal.

    Robert is a member of the Australian Technical Analysts Association (ATAA). He is also the Melbourne Chapter Vice-President, and a director on the national board. Robert endorses the ATAA as a worthy not-for-profit organisation for people looking for help and networking.
     
    See more information about the ATAA.
     


    Beware the sharks in the ocean.
    And whatever you do,
    beware of the sharks in the ocean!



    More details - Third party information

    Technical Analysis
    For even more information see the following just for starters
    (there are many, many more resources).

    Recommended: More useful resources:

    Quality charting software 

    • BullCharts - The Australian BullCharts charting software (with a User Group in Melbourne), focusing on all Australian securities and indexes, and can display charts of overseas markets and stocks.
    • AmiBroker - Good software for very serious progammability and heavy back testing capability, across many markets.
    • IncredibleCharts.com
    Free Charting Software online
    You could start off using free online charting tools:
    Text books

    NOTE: Any inclusion of any company, person or web site
    here is NOT an endorsement or recommendation of any sort.


    The information presented herein represents the opinions of the web page content owner, and
    are not recommendations or endorsements of any product, method, strategy, etc.
    For financial advice, a professional and licensed financial advisor should be engaged.

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    Last revised: 6 June, 2016.