Basic Technical Analysis This section will discuss:
Definitions and basic technical analysis assumptions with type graph and its use of indicators and oscillators Concept
Walk into an open area, and see current weather conditions. Did you see clear sky? Or cloudy? Or cloudy? Or even a very dark cloud? After that, remember, remember back to weather what is usually followed?
We generally with technical analysis will estimate will be rainy at this time if the weather was overcast, or vice versa, if you see the sunny weather, we do not expect the rain will fall.
Knowingly or not with technical analysis, we are making guesses about the future based on the current situation or condition. The estimate helps us to anticipate what might happen. For example, if we see a dark cloud on the peak of the rainy season, we certainly would not leave the house without preparing themselves for heavy rain is not it?
Walk into an open area, and see current weather conditions. Did you see clear sky? Or cloudy? Or cloudy? Or even a very dark cloud? After that, remember, remember back to weather what is usually followed?
We generally with technical analysis will estimate will be rainy at this time if the weather was overcast, or vice versa, if you see the sunny weather, we do not expect the rain will fall.
Knowingly or not with technical analysis, we are making guesses about the future based on the current situation or condition. The estimate helps us to anticipate what might happen. For example, if we see a dark cloud on the peak of the rainy season, we certainly would not leave the house without preparing themselves for heavy rain is not it?
By analogy, we can conclude that the exact mechanism of technical analysis with the weather forecast. The trick is very simple and easily done by everyone. Weatherman does not require other data to predict other than look to the sky and recognize the signs and habits before the rain. Technical analysis, too, just need the chart as the only source of data for analyzing market behavior and produce the next estimate.Many terms in the definition of technical analysis that you might find. For example, technical analysis as a study of prices, a study of market behavior, to the graph or on price patterns. With the aim to identify trends or looking for entry & exit opportunities or to maximize profits. But of course, you yourself realize that differences are only limited use of the term that ends on the same purpose. In essence, technical analysis is an analysis of market behavior to seek opportunities transaction.
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Market behavior
Conduct all parties involved in the market only appears in three forms of activity:
Conduct all parties involved in the market only appears in three forms of activity:
1. Buying
To purchase of specific instruments, both for new positions or to liquidate the position previously.
To purchase of specific instruments, both for new positions or to liquidate the position previously.2. Selling Selling of certain instruments, either for a new position or for the liquidation of the previous position.
3. Observing Choosing not to take a new position or liquidate an existing position, or has decided to hold the position until a certain time or price.
And the results of technical analysis of these activities led to an increase or decrease in price. If the buyer is more powerful than the seller, then the technical analysis course prices will rise, and vice versa. More and more parties request, the technical analysis will be the higher price, and if more and more parties will get low offer price. This happens because the market is trading where the law of supply and demand still apply.
To identify technical analysis whether prices have increased, decreased or moved within a limited area, we need data covering current prices and previous prices. Overall technical analysis data is then displayed in graph or chart, which is now available in atomatis through certain software or trading platforms. And it's certainly very easy, technical analysis is the analysis process.
When viewing the chart technical analysis, you will find the price moves up, down or flat in berlulang and again, from where the introduction of the price trends we can do, and then identify the characteristics of each to be used on the occasion of the next technical analysis.
3. Observing Choosing not to take a new position or liquidate an existing position, or has decided to hold the position until a certain time or price.
And the results of technical analysis of these activities led to an increase or decrease in price. If the buyer is more powerful than the seller, then the technical analysis course prices will rise, and vice versa. More and more parties request, the technical analysis will be the higher price, and if more and more parties will get low offer price. This happens because the market is trading where the law of supply and demand still apply.
To identify technical analysis whether prices have increased, decreased or moved within a limited area, we need data covering current prices and previous prices. Overall technical analysis data is then displayed in graph or chart, which is now available in atomatis through certain software or trading platforms. And it's certainly very easy, technical analysis is the analysis process.
When viewing the chart technical analysis, you will find the price moves up, down or flat in berlulang and again, from where the introduction of the price trends we can do, and then identify the characteristics of each to be used on the occasion of the next technical analysis.
Figure 1 technical analysis workflow
As shown in diagram 1, the process initiated through the technical analysis charts to identify trends and look for opportunities to create profit.
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The basic assumption
To build understanding and knowledge of further technical analysis, there are 3 basic assumptions need to know:
To build understanding and knowledge of further technical analysis, there are 3 basic assumptions need to know:
1. Market discounts everything
The first is that technical analysis market is a reflection of everything. Changes that occur in the market price is the result of the action (purchase or sale) are taken by actors with diverse backgrounds, information, knowledge and emotions are different.
Through the observation of price changes that occur in the market is enough for an analyst to predict subsequent price movements, technical analysis.
2. Prices move in a trend
Technical analysis prices tend to move in the same direction during several periods. Movement can be raised, lowered or moved in a certain area (sideway) form patterns whose effects can be recognized. Technical analysis does not believe that prices move randomly, so it can be estimated. If the price of an asset moves up at the end of this week, then next week is likely to continue the movement, to mark the end of the increase in technical analysis emerges clearly.
3. History repeats Itself
The patterns of specific technical analysis which was formed by the movement of prices that occurred in the past will happen again and cause a similar effect in the future. Technical analysts believe that the behavior of human transaction that is driven by information, desire and emotion en masse tend to be repetitive, such as technical analysis of mass crowd who do the queue due to the scarcity of kerosene at this time will return to repeat the behavior in the future when faced with similar situations.
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The first is that technical analysis market is a reflection of everything. Changes that occur in the market price is the result of the action (purchase or sale) are taken by actors with diverse backgrounds, information, knowledge and emotions are different.
Through the observation of price changes that occur in the market is enough for an analyst to predict subsequent price movements, technical analysis.
2. Prices move in a trend
Technical analysis prices tend to move in the same direction during several periods. Movement can be raised, lowered or moved in a certain area (sideway) form patterns whose effects can be recognized. Technical analysis does not believe that prices move randomly, so it can be estimated. If the price of an asset moves up at the end of this week, then next week is likely to continue the movement, to mark the end of the increase in technical analysis emerges clearly.
3. History repeats Itself
The patterns of specific technical analysis which was formed by the movement of prices that occurred in the past will happen again and cause a similar effect in the future. Technical analysts believe that the behavior of human transaction that is driven by information, desire and emotion en masse tend to be repetitive, such as technical analysis of mass crowd who do the queue due to the scarcity of kerosene at this time will return to repeat the behavior in the future when faced with similar situations.
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Technical analysis tool
A trader or investor only requires price and volume to be able to perform technical analysis. Where the price is the dollar value of assets traded, and volume is the amount of the transaction. Both of these data, and then appear in the graph which eventually became the main object of technical analysis.
Types of graphs
In technical analysis, there are various kinds of graph models, but in this introduction we will discuss three of the most popular.
Types of graphs
In technical analysis, there are various kinds of graph models, but in this introduction we will discuss three of the most popular.
1. Line chart
Technical analysis of this graph only contains a line that connects the close of trade with one another. For example, if on the first day trading price ending at level 300, and on the second day and closed at price of 200 on the third day at the price of 400 as shown in Figure 2, the straight line can be drawn from 300 to 200 and 400, from left to right.
Gambar 2 Line Chart
A line chart technical analysis have a clear and smooth movement but does not provide information on the highest price, lowest price and the opening of each session, resulting in fluctuations in the market, technical analysis is not visible during the period. Depending on which strategy you choose, this may mean or not.
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2. Bar chart
Technical analysis bar chart form resembles a rod that has a stalk on the left and right, and have more complete information, contains the opening price, highest, lowest and closing.
Open market prices are on the left stalk, and closure on the right stalk. While the tip of its trunk represents the highest and lowest price in a single trading period.
Open market prices are on the left stalk, and closure on the right stalk. While the tip of its trunk represents the highest and lowest price in a single trading period.
Gambar 3 Struktur bar chart
3. Candlestick chart
Candlestick technical analysis is a graph of the oldest discovered by technical analysts. Their structure resembles a candle, and have the same element with a bar chart, there are data Open, High, Low and Close at each session.
The price increases are usually formed with bright colors, and prices fell by a dark color. In addition to functioning as one type of chart, candlestick also has its own analysis model that has been widely used by traders in the world.
The price increases are usually formed with bright colors, and prices fell by a dark color. In addition to functioning as one type of chart, candlestick also has its own analysis model that has been widely used by traders in the world.
Gambar 4 Candlestick chart
The whole model has unique graphics, a person may be more like a line chart rather than a bar or candlestick. Observasilah all three, find where that interest you.
In figure 5 above, technical analysis charts line positioned at the far left displays the price is more subtle than a bar or candle charts. But the line charts do not have enough intraday data is important, for example the highest or the lowest trading price during that period, so the line charts are widely used just to facilitate the introduction of the trend, while the bar and the candle is more widely used for technical analysis transaction opportunities, short-term and medium.
In figure 5 above, technical analysis charts line positioned at the far left displays the price is more subtle than a bar or candle charts. But the line charts do not have enough intraday data is important, for example the highest or the lowest trading price during that period, so the line charts are widely used just to facilitate the introduction of the trend, while the bar and the candle is more widely used for technical analysis transaction opportunities, short-term and medium.
Figure 5 Technical analysis line graphs, bar and candlestick for the Euro Daily, May 2009{break}
Technical analysis indicators and oscillators
A technical indicator is a mathematical calculation based on their input on two things: price and volume. An indicator can be constructed by only considering the price, or just the volume or a combination of both.
Differences indicators and oscillators in technical analysis lies in the limits of computation. Indicators do not have upper and lower limits, such as Moving Averages technical analysis. While the oscillator is usually limited mobility in certain areas, such as 0 to 100, such as RSI and Stochastic, or moving between positive and negative areas with area middle 0, such as the MACD. However, in practice, indicators and oscillators are not to be distinguished in such a way, because they both use basic technical analysis and have the same benefits.
Two benefits of technical analysis indicators and oscillators are:
1. Determining trends and measure quality
In the category of technical analysis, there are indicators that can help traders to identify / define a trend that is happening, such as the use of Moving Average (MA), then measure its strength as Average Directional Movement Index (ADX), measuring the level of price volatility, such as Average True Range (ATR), and measure the speed of price changes, such as Momentum.
2.Menentukan level of entry and exit
The use of indicators can not be underestimated in helping a trader to determine the position of buying or selling decision. Any technical analysis indicator usually has its own method of producing the signal. Moving Average for example, generate a buy signal when the closing price surpassed the MA line, or when there is crossover between MA shorter periods over a longer period MA.{break}
Tips for choosing indicators
Choose the most suitable indicator and easy for you to use in analyzing the technical. Use as little as possible indicators for the system you are not too complicated in performing technical analysis. Select indicators based on their respective functions. For example: Moving averages to identify trends and RSI as a filter or search for a confirmation signal. Observe the behavior of the indicator on the price of the test. Get to know in what conditions these indicators function properly and under what conditions are subject to interference.
Review
Differences indicators and oscillators in technical analysis lies in the limits of computation. Indicators do not have upper and lower limits, such as Moving Averages technical analysis. While the oscillator is usually limited mobility in certain areas, such as 0 to 100, such as RSI and Stochastic, or moving between positive and negative areas with area middle 0, such as the MACD. However, in practice, indicators and oscillators are not to be distinguished in such a way, because they both use basic technical analysis and have the same benefits.
Two benefits of technical analysis indicators and oscillators are:
1. Determining trends and measure quality
In the category of technical analysis, there are indicators that can help traders to identify / define a trend that is happening, such as the use of Moving Average (MA), then measure its strength as Average Directional Movement Index (ADX), measuring the level of price volatility, such as Average True Range (ATR), and measure the speed of price changes, such as Momentum.
2.Menentukan level of entry and exit
The use of indicators can not be underestimated in helping a trader to determine the position of buying or selling decision. Any technical analysis indicator usually has its own method of producing the signal. Moving Average for example, generate a buy signal when the closing price surpassed the MA line, or when there is crossover between MA shorter periods over a longer period MA.{break}
Tips for choosing indicators
Choose the most suitable indicator and easy for you to use in analyzing the technical. Use as little as possible indicators for the system you are not too complicated in performing technical analysis. Select indicators based on their respective functions. For example: Moving averages to identify trends and RSI as a filter or search for a confirmation signal. Observe the behavior of the indicator on the price of the test. Get to know in what conditions these indicators function properly and under what conditions are subject to interference.
Review
- Technical analysis is the study of market behavior to identify trading opportunities.
- There are three basic assumptions that became the foundation of technical analysis; Market discount everything, price moves in trends and histroty repeat it self.
- Technical analysis requires two types of data to analyze the price and volume. Indicators and other tools are based on two data.
- Three of the most popular types of charts are line charts, bar charts and candlestick charts.
- Indicators and oscillators are distinguished based on the movement area but have the same interpretation.
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