The Beginner’s Guide To Trading Using Technical Analysis
Posted In The Blog | 4 Trader Comments
So it is after more than 3 hours of pulling it all together. A collection of the finest guides, tutorials, videos, articles; complied together in the order that they should be read.
Click the titles for the full articles. Let me know what you think via the comments!
Technical analysis is the superior way for investors and traders to make decisions when trading stocks and options. For many option traders, technical analysis gives much clearer entry and exit signals for making money in the markets. While it’s true that some investors dismiss technical analysis as inconclusive and arbitrary, the fact remains that technical analysis (when used properly) has a lot of empirical evidence to support it as a reliable trading tool.
One of the most difficult concepts for beginning traders and some professionals alike is the understanding of simple support and resistance levels. As such, we decided to provide this very simple explanation of support and resistance levels to help you “get over the hump.”
Moving averages are very popular among beginning traders and investors. They are simple to use and give very easy indicators to buy/sell a stock. The 200-day moving average is generally the most talked about along with the 50-day moving average. Moving averages do not predict price direction, but rather define the current direction with a lag. Moving averages lag because they are based on past prices – which is mainly why the are not a great short term trading indicator.
Bollinger are one of the most popular technical studies used today. They are simple and give clear signals which is why so many traders use them on a daily basis. However, their relation to volatility and prices moves may reveal some shocking discoveries. Or at the least give you a little more understand of how they REALLY work in today’s fast moving market.
RSI is a momentum indicator or oscillator that measures the speed and change of price movements in a security. Traditionally it will move between 0 and 100. It is usually considered that the stock is overbought when RSI is above 70 and oversold when RSI is below 30.
Fibonacci retracements, fans, arcs, and time series are some of the best technical analysis tools for traders. They are not a perfect indicator (what is right) but they are very helpful if you know the basics.
Ribbon studies and multiple moving averages are becoming more and more popular among trend traders. The basic idea behind the technical indicator is that you are using roughly 12-16 different moving averages on the same exact chart (instead of using just 1 or 2 on your chart).
Whipsaw trading can really put a damper on your portfolio, so let’s take a step back right now and do a quick mini-lesson on technical analysis and MACD Divergence. After looking at charts for the past 5 days sitting on mostly all cash heading into expiration, I’ve noticed that the technical are flashing some important warning signs. Mainly I’m seeing a whole bunch of divergence.