Technical Analysis

What is technical analysis

There are two main approaches used to decide when to buy or sell in the market. These methodologies are called technical analysis and fundamental analysis and each one are based in radically differente principles. In this section we are going to discuss mainly about technical analysis but at the same time we are going to present an introduction about fundamental analysis to introduce visitors.

Fundamental analysis.

In the forex market, fundamental analysis examines in depth the political, social or economic events and how and why these events have historically affected the prices of currencies. So it comes to understanding the current state and likely evolution of the prices according to the socioeconomic circumstances that are currently being developed or planned to be developed.

In the case of stock market analysis for example, the fundamental analysis examines the financial reports published by the company, audit, quarterly and annual balance sheets, market trends, product quality, dividends, sales, position against competitors, news, etc… Ultimately determines whether the stock price is below, above or match the price at which such action is quoted at the time. If, for example, the result of fundamental analysis shows that the share price should be higher than what is listed at that time, the recommendation is buy it and wait for the market's true value.

Technical Analysis

Unlike previous approach, technical analysis is based on the premise that the price of an instrument is inexorably determined by supply and demand. In fact, according to this approach, an instrument like a share or a currency for example, is not bought or sold due to its real value, but by what people think it's worth. Under this premise, all the information required is in the same price of the instrument and its evolution over time. Instead of an extensive analysis of business and economic fundamentals, it would be sufficient to observe the movement of the instrument price. An increase in investor interest in a specific instrument, whatever the reason (in fact no matter what the reason), will result in an increase in the price of such instrument. Part of the work of the Technical Analysis is to determine whether the increase in price will be so significant that worth purchasing that instrument.

Trend indicators

1. Moving Averages.
2. Bollinger Bands.
3. Average Directional Movement Index.
4. Commodity Channel Index.
5. Parabolic SAR.
6. Standard Deviation.

Oscillators

1. Average True Range.
2. Bulls Power.
3. Bears Power.
4. Chaikin Oscillator.
5. DeMarker.
6. Detrend Price Oscillator.
7. Envelopes.
8. Force Index.
9. Ichimoku Kinko Hyu.
10. Momentum.
11. Stochastics Oscilators.
12. Moving Averages of oscillators.
13. MACD (Moving Average Convergence/Divergence).
14. RSI (Relative Strenght Index).
15. Relative Vigor Index.
16. William´s Percent Range.
17. Laguerre.
18. Disparity Index.

Bill Williams Oscillators

1. Accelerator/Decelerator oscilator.
2. Alligator.
3. Awesome oscilator.
4. Fractals.
5. Gator Oscillator.
6. Market Facilation Index.

Indicators based on market volumes

1. Acumulation/Distribution.
2. Money Flow Index.
3. On Balance Volume.

Other technical analysis indicators and tools

1. Pivot Points
2. Camarilla Equation
3. Elliot Wave Theory.
4. Wolfe Waves.
5. Parabolic SAR.
6. Line charts.
7. Bar Charts.
8. Candlestick Charts.
   1. Candlestick Pattern
9. Other types of price charts
10. Fibonacci.
11. Chart Formations

In subsequent articles we will explain in detail how are used technical indicators and the chart analysis to trade in the market.