Friday, June 12, 2009

What is Technical Analysis?

There is nothing mystical about the markets. Their movements can be analysed and understood by anyone who understands the basic concepts of energy.

- Trend gives us the direction of the market
- Momentum gives us the strength of the trend
- Cycles give is the timing for a change in energy
- Support and Resistance are barriers to energy

Technical analysis is the reading and evaluation of these energies.

We use Technical Indicators to measure these various energies so we have an objective evaluation of them.We cannot definitively say what a particular share price will do. However, when these energies align, as measured by the indicators and price patterns, we are presented with a low-risk, high-probability trade that we should act on.Successful trading is a combination of:

- Developing a trading plan with set rules
- Incorporating stringent risk management strategies into your plan,
- Evaluating the energies in the market through the application of technical analysis.
- Having the patience to wait for a low-risk / high-probability trade
- Executing the trade in accordance with your predefined plan.


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