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Technical analysis is the study of price and volume. Using this information, the trader or investor constructs a market road map based on supply and demand in order to set up contingency plans appropriate for the timeframe of the trade or investment in question.
We do not need to know the future in order to make money in the market today:
In and of itself, technical analysis is a rather simple matter, as price and volume are factual statistics generated during the trading day. It is no different than baseball statistics. These facts describe the situation in the here and now. All we need to know is that trends and consolidations will go on until they end, and trade accordingly. The market tells us what to do, if we listen to it, while respecting the Laws of Nature.
"If => Then" scenarios are formed, based on unbiased observations:
Our actions in the market are determined according to which contingency unfolds. Traders and investors prepare themselves by analyzing observations on market sentiment, internals, support/resistance levels and key pivot points for market indices, stocks and futures. Use of moving averages and the Average Directional Index (ADX) indicator helps to determine whether the market is trending up/down or chopping sideways. With swing charts, bar charts, and Japanese candlestick charts, we gain insight into market action around support and resistance to analyze supply and demand based on the fundamental principles of classical technical analysis.
The goal is to buy every dip in an uptrend and sell every rally in a downtrend:
Technical analysis is not used as a tool to "predict" the future or to pick tops and bottoms. It is used to detect areas of trend change and emerging trends. In a trading range, traders generally look to buy at the low end of the range and to sell at the high end of the range or stay out all together. In a trending market, traders generally look to enter the market on every retracement until it ends on a test and enters a trading range.
Teresa Lo
Founder
www.IntelligentSpeculator.com
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